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In financial terms, diversification means spreading risk across different assets.

The best definition of diversification is the old saying “don’t put all your eggs in one basket”. Diversification involves investing in different assets and different geographic areas. For example, investing in fixed income and variable income, or equities, and doing so in companies in Europe, the United States, emerging countries, etc.

Good diversification helps reduce investment risk as any bad news or downturns will have less impact. Here you can see the importance of diversifying investments.