What is diversification in investment?

Diversification in investment refers to the strategy of spreading investments across different asset classes, industries, or geographical regions to reduce risk. By holding a variety of investments, such as stocks, bonds, real estate, and commodities, an investor can minimize the impact of any single investment’s poor performance on the overall portfolio. Diversification helps protect against market volatility and provides a better chance for stable returns over the long term. This strategy is often employed by both individual investors and institutional investors to manage risk and achieve more consistent performance.