Glossary entry
Portfolio diversification applies risk spreading to the actual combination and weights of investments. It considers differences within asset classes as well as allocation across them, and checks whether funds duplicate existing holdings. Rebalancing can restore intended weights after market movements, but costs, taxes, and the investor's circumstances influence how that process is carried out.
Illustrative example
A portfolio with several equity funds may still be dominated by the same large companies. Adding a different fund only helps if it changes relevant exposures.
What to consider
More holdings do not automatically mean better diversification. Market-wide declines and changing correlations can still cause simultaneous losses across the portfolio.
General information, not a personal recommendation. Product availability, rights, and obligations are determined by the relevant provider, jurisdiction, and approved agreements.