What is Diversification?
Diversification: Spreading money or products across several areas to reduce risk.
Where Diversification fits
Diversification is part of Credit & Risk in Finance. Credit lets you use money now and repay later with interest. Collateral secures a loan, a credit score signals reliability, and diversification limits risk.
Practical tip
Borrow only for things that earn more than the interest costs.
Related terms
- Collateral
- An asset pledged to secure a loan.
- Interest rate
- The price of borrowing money, shown as a percentage.
- Budget
- A plan for how much money you expect to earn and spend.
- Credit score
- A number showing how likely someone is to repay debts.
Formulas you will use with it
Test yourself
Which term means: “Spreading money or products across several areas to reduce risk.”?
Collateral · Credit score · Diversification
Answer: Diversification
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