We are independent & ad-supported. We may earn a commission for purchases made through our links.

Advertiser Disclosure

Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.

How We Make Money

We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently from our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is a Diversified Fund?

Malcolm Tatum
By
Updated May 17, 2024
Our promise to you
WiseGeek is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At WiseGeek, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

A diversified fund is any type of investment fund that is composed of a wide range of investments, with each of those investments carrying a different degree of risk or volatility. The idea behind this type of fund is to create a situation where the investor continues to earn a return from the fund even if some of the assets are not performing well. Since the scope of investments contained within the fund are so varied, the ones that are increasing in value easily any lack of growth exhibited by stocks and other investments that are either stagnant or have posted a loss.

The concept of the diversified fund is in contrast to what is generally known as a focused or specialized fund. With these types of funds, the plan is to purchase investments that are all related to a specific industry or field, or are all connected with a given geographical location. For example, a focused fund may include stocks issued by pharmaceutical companies, as well as bond issues that relate to the construction of new facilities by those same pharmaceutical companies. As long as those companies are performing well, then the return on the investments is likely to remain quite high. Should factors take place that undermine the performance of those companies, then the value of the shares and the return on the bonds may be adversely affected, resulting in a significant loss for the fund.

With the diversified fund, a scenario of this type is much less likely. If the fund contains investments that related to several different industries, there is a good chance that at least a few of those investments will be producing a high return even as others are performing at a more modest level. Should the diversification include investments connected with textiles, construction, and commodities, and the textile investments sustain a decrease for a period of time, the upward movement of the construction investments and the commodities cover that loss. This allows the fund to continue growing, albeit at a pace that is slower than if all the investments were increasing in value.

For investors who tend to be more conservative and want some type of steady return, a diversified fund approach makes sense. In the event that a particular set of investments do not show any indication of recovering after losing value for some time, they can normally be replaced with other options that show greater promise. By maintaining a wide range of stock options, bonds, commodities, and other investments within the diversified fund, it is much easier to minimize the overall impact of any one of those securities and thus allow the investor to continually move closer to his or her ultimate financial goals.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum , Writer
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.

Discussion Comments

Malcolm Tatum

Malcolm Tatum

Writer

Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.