Diversification is the practice of spreading your investments across different assets to reduce risk. The core idea is to avoid putting all your eggs in one basket, as different types of assets perform differently under various market conditions.
Why Diversification Matters:

Reduces Risk: Different assets (e.g., stocks, bonds, real estate) react differently to market events. If one asset performs poorly, others might perform well, which can balance out losses and protect your portfolio.
Smooths Returns: A diversified portfolio tends to experience less volatility because it’s less reliant on the performance of a single investment. This result...