Diversification

The process of allocating investments across various financial instruments, industries, or other categories to reduce exposure to any one particular risk. It's a common strategy in portfolio management to manage market risk.

Asset allocation is the strategic process of spreading investments across various financial instruments, industries, or categories to minimize exposure to a particular risk. This widely practiced strategy in portfolio management is employed to effectively manage market risk by diversifying investments across a spectrum of assets. The objective is to attain a well-balanced and optimal mix of investments that align with specific financial goals while mitigating risk.