Portfolio diversification refers to the practice of spreading investments across different types of assets, industries or geographical locations in order to reduce risk and improve chances of higher returns. By not putting all your eggs in one basket, you minimize the impact of a potential loss from any single asset or investment. Diversifying your portfolio helps to balance risk and reward, ensuring that if one part of your investments underperforms, other parts may still contribute positively to your overall returns. This strategy is widely recommended by financial experts as an effective way to manage investment risks and improve long-term prospects for growth.