Final answer:
Diversification is a strategy used to spread investments and reduce the risk of loss by investing in a wide range of companies instead of a single company.
Step-by-step explanation:
Diversification is the strategy of spreading investments across different assets to reduce the risk of loss. In finance, it refers to buying stocks or bonds from a wide range of companies instead of investing in a single company. By diversifying, investors can reduce the impact of any one company's performance on their overall portfolio. For example, if one company performs poorly, the gains from other companies can help balance out the losses.