What is Diversification?
Diversification is spreading investments across many companies, sectors, countries, and asset classes to reduce the impact of any single loss.
Detailed Explanation
A KiwiSaver scheme fund holding 1,000 global shares is more diversified than one holding 20 NZ shares. Diversification reduces the chance that one company or one country wipes out a meaningful share of returns. It is the most-cited free improvement in investment outcomes.
Example
Illustrative example — A global growth fund might hold US tech, European industrials, Japanese consumer goods, and emerging-market financials — exposure to one country crashing has a smaller impact than a NZ-only equivalent.
Frequently Asked Questions
Can I be over-diversified?
Possible in theory; in practice most KiwiSaver scheme funds are diversified about right by design.
Related Terms
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