Understand investment products, market mechanics, indicators and research terminology. Each entry includes an explanation, example, cautions and related learning.
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Diversification is spreading capital across holdings whose returns do not move in perfect step, so that the combined portfolio is less volatile than the weighted average of its parts. It mainly reduces risks specific to one company, sector or asset.
Drawdown is the percentage decline of an investment, account or strategy from its previous peak value to a later low. Maximum drawdown is the largest such peak-to-trough fall over a chosen period.