Final answer:
Diversification through mutual funds can reduce investment risk by spreading investments across different assets in a portfolio.
Explanation:
Diversification is a key strategy to reduce investment risk by spreading investments across various assets. For example, investing in mutual funds that hold a mix of stocks and bonds can help mitigate the impact of a single asset's poor performance. By following the principle of not putting all your eggs in one basket, investors can achieve better overall portfolio performance.
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