Glossary of Municipal Securities Terms


The practice of including different types of assets (e.g., securities that differ by type or location of issuer, maturity, or credit quality) in a portfolio in an effort to reduce risks or improve overall portfolio performance. Diversifying a securities portfolio by type or location of issuer, for example, might protect the portfolio against adverse conditions in a particular industry or region of the country, while diversifying by credit quality might permit the acquisition of lower-rated, higher-yielding securities while protecting most of the portfolio’s capital in higher quality securities.

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