Definition of "Diversification"

A financial strategy to help reduce risk by spreading your assets in a variable annuity across different asset classes, such as stocks and bonds, or across different types of securities within the same asset class. For example, you can diversify your stock holdings into stocks of different industries.

An investment strategy that involves establishing a portfolio of different investments by mixing industries and types of assets to spread their risk. In this way a particular event (introduction of automobiles, for example) will have less impact on the investor\'s total portfolio than if you owned a single investment in a buggy whip company. In other words, don\'t put all your eggs in one basket.

Spreading risk by placing assets in different types of investments (i.e., mutual funds, stocks, bonds, etc.) and various companies in different industry groups (i.e., pharmaceutical, utility, airline, etc.).