Diversification is a risk management approach that includes investing in a variety of assets in decreasing the overall risk of a portfolio.

By spreading investments across different asset classes, such as stocks, bonds, and real estate, an investor can reduce the impact of any one investment’s performance on the portfolio as a whole.

Diversification can also involve investing in different sectors and geographic regions to further spread out risk. The goal of diversification is to minimize the impact of any one investment on the portfolio’s overall performance and to create a more stable and balanced investment portfolio.