Diversification as a method for lowering risk means

Diversification means spreading investments across different assets to reduce overall risk. The idea is that poor performance of one investment can be balanced by good performance of another. For example if an investor holds shares in technology banking and energy sectors a fall in one sector may not affect the total portfolio. Diversification does not remove systematic risk but it reduces unsystematic risk. It is one of the most important principles in modern portfolio management. Successful investors always diversify to protect wealth and gain stable returns.