Markowitz diversification


 

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Markowitz diversification

A strategy that seeks to combine in a portfolio assets with returns that are less than perfectly positively correlated, in an effort to lower portfolio risk (variance) without sacrificing return. Related: Naive diversification.



Markowitz diversification

Similar Matches

Liquidity diversification

Liquidity diversification

Investing in a variety of maturities to reduce the price risk to which holding long bonds exposes the investor.


Unique Diversification Benefit

Unique Diversification Benefit

Reduction in the likelihood of financial distress for a conglomerate firm that comes with its diversified investments.


Sector diversification

Sector diversification

Constituting of a portfolio of stocks of companies in each major industry group.


Currency diversification

Currency diversification

Using more than one currency as an investing or financing strategy. Exposure to a diversified currency portfolio typically entails less exchange rate risk than if all the portfolio exposure were in a single foreign currency.


Diversification

Diversification

Investment jargon for not keeping all your eggs in one basket. Diversification implies that you distribute your capital among various assets to reduce loss if, through bad luck or judgement, one of them fails you.There are four main areas of risk to think about.Asset allocation: spreading your investments among different classes of asset (bonds, equities, property etc)Shares: spreading your stock investments over a sufficient number of shares (or invest in a diversified collective fund)Sectors: making sure the shares you invest in are in companies operating in a variety of sectorsCountries: getting some exposure to economies outside the UK as well as in the UKMost people agree that diversification is essential to reduce risk. There is an argument that to make exceptional returns, you have to concentrate your investments - the big winners theory. 'Put all your eggs in one basket and watch that basket very closely'.


Further Suggestions

Cone of diversification
Naive diversification
Indirect diversification benefits
Principle of diversification
Diversification
International diversification
Efficient diversification
Diversification cone


 
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