What Is Diversification?

Diversification across 2 exams

Diversification appears on the following exams. Each defines it in the context candidates are tested on:

Series 7

An investment strategy of spreading money across different securities, sectors, or asset classes to reduce the impact of any single holding's poor performance. It lowers unsystematic (company-specific) risk but not systematic (market-wide) risk.

Series 66

An investment strategy that spreads capital across multiple securities, asset classes, sectors, or geographies to reduce unsystematic risk; a cornerstone of prudent portfolio management. The Series 66 stresses diversification as a key suitability requirement and a defensive measure against concentration risk.