Glossary
Diversification: meaning, example and why it matters
Spreading money across different investments so that one holding doing badly has a smaller effect on the whole. It reduces concentration risk but does not remove market risk.
Worked example
₹1,00,000 in one stock that falls 30% loses ₹30,000. Spread as ten holdings of ₹10,000, one of them falling 30% costs ₹3,000, or 3% of the portfolio.
Illustrative numbers for explanation only. They are not market data, a forecast or a suggestion.
Why it matters
It lowers the chance that a single holding decides the whole result. Holdings that tend to move together give less protection, and no mix removes market-wide falls.
Related terms
See it in practice
Frequently asked questions
Does owning many funds mean I am diversified?
Not necessarily. Several funds can hold mostly the same stocks. What matters is how different the underlying holdings are.
Is this page investment advice?
No. Diversification is explained in general terms with illustrative numbers. Market Dekho is not a SEBI-registered Research Analyst or Investment Adviser.
Learn these terms in order
The free Start Learning path introduces them step by step, with quizzes and practice exercises.
Start learning free →← Direct plan and regular planAll termsDividend →
Educational content, not investment advice. Market Dekho is not a SEBI-registered Research Analyst or Investment Adviser. Spotted a mistake? Email marketdekho01@gmail.com.