Definition: Overdiversification is a financial strategy in which an investor or company diverts some of its investments from one sector to another, often due to uncertainty about future economic conditions. This diversification can help mitigate risk and increase returns by spreading out investment risks across various sectors. In the context of overdiversification, it's important to note that overdiversification is a strategy used for investment portfolios, not for individual investments in companies or assets. Over-diversified portfolios may be more volatile
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