What is Diversification?
Diversification is the practice of spreading investments across different assets, sectors, or regions to reduce the impact of any single investment performing poorly.
Example
Instead of putting all your money in one tech stock, you might hold a mix of stocks, bonds, and an index fund so one bad year does not sink your whole portfolio.
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Related terms
ETF
An ETF (Exchange-Traded Fund) is an investment fund that holds a basket of assets and trades on a stock exchange like a single share, offering low-cost diversification.
Mutual Fund
A mutual fund pools money from many investors to buy a professionally managed portfolio of stocks, bonds, or other assets. Investors own units proportional to their contribution.