Diworsification

  

Categories: Mutual Funds, Investing

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.

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