Building a diversified investment portfolio is one of the most effective strategies to reduce risk while pursuing steady returns. Diversification means spreading your investments across different asset classes, such as stocks, bonds, real estate, and alternative assets. This approach ensures that a poor performance in one area can be offset by gains in another.

When creating a diversified portfolio, start by defining your financial goals and risk tolerance. Younger investors with longer time horizons may choose a higher allocation to equities, while those nearing retirement might prefer more stable assets like bonds. Regular portfolio rebalancing is essential to maintain your target allocation, especially after market fluctuations.

Remember that diversification is not just about quantity but quality. Adding assets that behave differently under various market conditions is key. By focusing on correlation, you can ensure your portfolio remains resilient even during market volatility.