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Glossary
Returns & risk

Diversification

Owning things that do not move together, so that no single failure ruins you.

Full guide, with a simulator
Diversification, the only genuinely free lunch

It is the one genuinely free lunch in finance: it reduces risk without reducing expected return. But its power comes from low correlation, not from the number of names on your list.

Twelve technology stocks are one bet held twelve times. Roughly 20 to 30 genuinely different holdings captures most of the available benefit; beyond that you are mostly adding admin.

Figure

One investment is the fund

the oneeverything else

Most go to zero and that is not a failure of selection, it is the shape of the asset class. It is why a venture investor has no use for a company that will merely do quite well.

Why it matters

The market does not pay you for risk you could have diversified away for free.

The mistake everyone makes

Confusing quantity with diversity.

Related terms

Correlation
The degree to which two things move together, from −1 to +1.
Systematic risk
The risk of the whole market, which no amount of diversification removes.
Asset allocation
How you split money between shares, bonds, cash and everything else.

See Diversification on a real company

SteadyShares pulls this straight from the filings for 1,100+ companies, alongside moat scores, DCF fair value and peer comparison. Free to look around.

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