Final answer:
Diversification is a risk management strategy that involves spreading investments across different companies or assets to reduce overall risk. It provides a measure of safety by reducing the impact of poor performance of any single investment.
Step-by-step explanation:
Diversification is the practice of spreading investments across a wide range of companies or assets to reduce the overall risk. By investing in different companies or asset classes, the ups and downs of individual investments can be offset, leading to a more stable portfolio. This practice provides a measure of safety as it reduces the impact of any single investment performing poorly.