Nope, that’s not a typo on our site...it’s a real thing. Diworsification is when you think you’re diversifying your portfolio—with the idea that diversification decreases risk by increasing the number of baskets you’re putting your eggs in—but you’re really just making it worse.
So yeah...diworsification just means diversifying, but making things worse instead of better...like over-diversifying.
Don’t panic; we’ll explain the difference between aviators-cool-diversification and flip-up-uncool-diworsification.
Diversification done right means you are invested in a way that’s actually diverse, which could mean across different industries (say, ones that would last through a recession, like consumer staples, and ones that wouldn’t but could make big bucks, like cutting-edge tech), different size companies (small, mid, large), and different performances (value, growth, blend). A diverse portfolio looks different for different people—for instance, you’re probably investing more conservatively if you’re 55 than if you’re 25—but the idea is that you don’t have all your eggs in one basket, in case that basket...goes under.
So, diworsifying your portfolio would be if you think you’re diversifying, but you’re really just investing in stocks, ETFs, or what-have-you that are all pretty similar. Like...maybe you’re investing in a bunch of ETFs, feeling really good, until you realize half of them are heavily invested in risky, emerging tech markets...not too diverse. Diworsification just means you should check yoself before you wreck yo-portfolio.
Related or Semi-related Video
Finance: What is a Diversified Mutual Fu...20 Views
finance a la shmoop what is a diversified mutual fund? all right people
listen up it's lots of investments stocks bonds exposure to risk and reward [Risk and reward punch man in face]
everywhere energy, telecom, insurance, real estate, banking, chemicals, tech, retail not
enough diversity yet well those are just sectors or industries and there's a
whole bunch of them what about geography geographic diversity the US, Russia, China
Europe someday maybe Mars Elon what do you think well maybe exposures to [Elon Musk floating in space]
different currencies or commodities cycles as the diversity you seek hmm
well that's diversity Benetton eat your heart out so the bigger question is why
would you want such diversity? well the idea is that you mitigate risk by being
diverse the don't put all your eggs in one basket thing if one investment goes [Value of investment graph appears]
bust well at least you have plans B C and D to fall back on and if this is
grabbing you check out our videos on efficient markets theory for more on the
subject or maybe diversify your knowledge and watch all of our finance
videos food for thought and you know please click on the ads that we got to [Man holding begging sign]
eat around here
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