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Diversification means spreading your investments across different types of assets to reduce risk. It's like not putting all your eggs in one basket.
In Depth
Diversification is a strategy employed to minimize risk by investing in a variety of assets. The idea is that if one investment performs poorly, others may perform well, balancing out your overall returns. This approach helps protect your portfolio from significant losses that could occur if you were heavily invested in just one or a few areas. It's a core principle of smart investing for long-term growth and stability.
Example
Instead of investing all her money in technology stocks, Sarah diversified her portfolio by also buying bonds, real estate, and international stocks.