Magic of diversification

Definition:

The effective reduction of risk (variance) of a portfolio, achieved without reduction to expected returns through the combination of assets with low or negative correlations (covariances). Related: Markowitz diversification.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Money market

Money markets are for borrowing and lending money for three years or less. The securities in a money market can be U.S.government bonds, Treasury bills and commercial paper from banks and companies.

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