Diversification

Diversification is a fundamental risk management strategy employed in investment portfolios, designed to reduce volatility and enhance long-term returns by spreading investments across a wide array of assets. The core principle is famously summarized as "don't put all your eggs in one basket." By mixing different types of investments—such as stocks, bonds, real estate, and commodities—and further spreading them across various industries, geographies, and company sizes, an investor aims to mitigate the impact of poor performance from any single asset or sector.