A diversified investment portfolio spreads your money across different asset classes — such as stocks, bonds, and cash — as well as different sectors, geographies, and investment styles. The goal is to reduce risk by ensuring that a decline in one area does not dramatically impact your entire portfolio. Diversification does not eliminate risk or guarantee a profit, but it is one of the most widely accepted principles of long-term investment management. The right mix of assets for your portfolio depends on your time horizon, risk tolerance, income needs, and overall financial plan.