Diversification

Diversification, in the investment context, is the spreading of an investor’s assets across different assets that are expected to perform in ways that are not correlated. The purpose of diversification is to reduce risk in an overall portfolio of assets.  In a broader business context, other things can be diversified to rescue risk. For example, if a company has a single customer or single supplier, then there is concentration risk that can be reduced by diversifying to whom the company sells or to whom the company buys.