Diversification is a fundamental principle in building a successful investment portfolio. By spreading your investments across different asset classes, industries, and geographies, you reduce the risk of losing significant amounts of money if one market or sector performs poorly. A well-diversified portfolio typically includes a mix of stocks, bonds, real estate, and other investments. For instance, if the stock market experiences a downturn, your investments in bonds or real estate can help mitigate losses. Diversification not only reduces risk but also increases the potential for long-term growth. Whether you’re a seasoned investor or just starting out, diversifying your portfolio is essential to managing risk and achieving your financial goals.