Diversification
Spreading capital across assets that behave differently, so weakness in one is offset by others. It reduces avoidable risk but does not remove market-wide risk.
Diversification combines assets whose returns are not perfectly correlated, so their ups and downs partly cancel out and the overall ride is smoother than any single holding. When assets play genuinely different roles — growth, defence, inflation protection — the portfolio becomes more robust across environments.
Diversification reduces avoidable, asset-specific risk; it does not remove market-wide risk, and in a crisis correlations can converge. Its protection is real but not absolute — which is why a rules-based approach also reads the environment rather than relying on a fixed mix alone.