A risk management technique that mixes a wide variety of investments within a portfolio. This mix helps a portfolio lower risk, because a portfolio of different investments, on average, yields higher returns and lower risk than investments in one investment. Diversification smooths out unsystematic risk (company risk) through investing in multiple industries with assets that have low correlation between each other.

A well diversified portfolio, scientifically proven, is between 25 and 30 assets. Investing in more than 30 assets will indeed lower risk further, but at diminishing returns.