All About Diversification


Mins Read 2


Diversification will consistently come up in your day-to-day and long-term investing. Because of that, newbie investors should familiarize themselves with the term.

What does diversification mean?

Diversification means to lower your investment risk with a variety of different investments in your portfolio. Doing so will enable you to limit exposure to volatility in specific stocks.

For example, say you have two stocks in your portfolio with equal weights. If one stock drops by 10% while other stock stays flat, the overall portfolio performance will only drop by 5%.

Diversification can occur through filters like geography, industry, market cap size, and more.

You can achieve a high degree of diversification with 15 stocks in your portfolio. Obviously, there is also trade off here: the more companies you have in your portfolio, the higher transaction cost.

Easy ways to diversify your investments

Modern-day investing is extremely accessible, considering available features like low-cost or zero commissions, fractional shares, and funds.

Funds, or collections of individual investments, can include index funds (aka funds that track a specified index) like mutual funds or exchange-traded funds ETFS).

ETFs trade on stock exchanges just like regular stocks, and investors can buy them throughout the day. Some EFTs are broad, like SPY (which tracks stocks on the S&P 500 index). Others are more thematic, like TAN, an ETF that tracks solar power companies.

Bottom line on diversification

You can easily diversify your investments by choosing securities in a variety of industries, asset classes, and even regions. As long as the securities react differently to different market events, that means that they are uncorrelated and diversified.

Raseed caters to people in the GCC region, and investing in the US stock market is the perfect example of how to achieve geographic and industry diversification. Sometimes, global events impact various international markets, but geography can often help incapsulate investments from market volatility elsewhere (like the GCC region). Staying on top of local and international financial news helps ensure you're aware of what's going on with your US stock market investments.

Never miss a thing!

news and markets updates

* Terms apply

Raseed Invest Limited © 2021 - All Rights Reserved.

Raseed Invest Limited (“Raseed”) registered in the Dubai International Financial Centre (“DIFC”) and is regulated by the Dubai Financial Services Authority (“DFSA”) to conduct financial services “Arranging Deals in Investments” with a 'Retail' endorsement. Raseed does not provide any trading or investment advice and shall not be responsible for any loss arising from any investment based on any general information provided by Raseed or as may be available on Raseed’s website and other web-based services (collectively, the “Website Services). Raseed does not warrant that the information is accurate, reliable or complete or that the supply will be without interruptions. Any third party information provided through does not reflect the views of Raseed.

The content of the Website Services provided by Raseed is only intended to provide you with general information and is neither an offer to sell nor a solicitation of an offer to purchase any security and may not be relied upon for investment purposes. Any commentaries, articles, daily news items, public and/or private chat publications, stock analysis and/or other information contained in the Website Services should not be considered investment advice.

Raseed shall not be liable for any delay, inaccuracy, error or omission of any kind in the information provided by Raseed and/or any third party information provider or for any resulting loss or damage you may suffer as a result of or in connection with the information supplied by Raseed and/or any third party information provider. In addition, Raseed shall have no liability for any losses arising from unauthorized access to information or any other misuse of information.

Any opinions, news, research, analysis, prices, or other information contained on our Website Services or emailed to you are provided as general market commentary, and do not constitute investment advice. Raseed will not accept liability for any loss or damage, including, without limitation, for any loss of profit which may arise directly or indirectly from use of or reliance on such information. Each decision as to whether an investment is appropriate or proper, is an independent decision by you. You agree that Raseed has no fiduciary duty to you and is not responsible for any liabilities, claims, damages, costs and expenses, including attorneys’ fees, incurred in connection with you following Raseed’s generic investment information. Raseed makes no representations as to whether a particular investment is appropriate or suitable for you.

View important disclosures