Final answer:
Diversification through investing in a wide range of companies and assets helps minimize risk in a portfolio.
Explanation:
Diversification: Investing in a wide range of companies through stocks or bonds helps minimize risk by spreading exposure across various assets.
Risk Reduction: Holding varying investments, even within the same company or sector, can help reduce risk by preventing reliance on a single asset or source of income.
Portfolio Diversification: By creating a portfolio with different stocks and bonds rather than concentrating on one type, individuals engage in risk pooling and reduce the impact of extreme fluctuations in value.
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