User:LadyGeek/Diversification

Introduction
Like "risk," there is no single universally accepted definition of "diversification." One dictionary definition is "To distribute (investments) among different companies or securities in order to limit losses in the event of a fall in a particular market or industry."

Markowitz diversification
Within the framework of modern portfolio theory (MPT), the term Markowitz diversification can mean "combining securities with less-than-perfect positive correlation in order to reduce risk in the portfolio without sacrificing any of the portfolio’s expected return." This approach to diversification was introduced by Harry M. Markowitz in his ground-breaking 1952 paper, Portfolio Selection.

The rationale behind this technique contends that a portfolio constructed of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio.