Glossary
Diversification
Diversification means spreading investments across different asset classes, sectors, and geographies to reduce the impact of any single investment's poor performance on your overall portfolio.
Why it matters
Diversification is the closest thing to a free lunch in investing. While it won't prevent losses entirely, it ensures that a downturn in one area doesn't devastate your entire portfolio. Concentrated positions — like holding mostly your employer's stock — carry outsized risk that diversification eliminates.
Example
An investor with 100% in tech stocks would have lost 33% in 2022, while a diversified portfolio of stocks, bonds, and international holdings might have lost only 15%.
How Ray helps
Ray analyzes holdings across all your connected investment accounts to flag concentration risk. Run to see how your investments are spread across sectors and asset types.
$ ray "is my portfolio diversified?"Related terms
Asset Allocation
Asset allocation is how you divide your investment portfolio among different asset classes — stocks, bonds, real estate, and cash.
Index Fund
An index fund is a type of mutual fund or ETF designed to track the performance of a specific market index, like the S&P 500.
Mutual Fund
A mutual fund pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities.
Portfolio
A portfolio is the complete collection of your financial investments — stocks, bonds, mutual funds, ETFs, real estate, and other assets.
Dollar-Cost Averaging
Dollar-cost averaging (DCA) is investing a fixed amount at regular intervals regardless of market conditions.