Answer: Mitigates the likelihood of catastrophic investment outcomes under typical market conditions.

**Explanation:** - **Option A** is incorrect because, while diversification through the portfolio approach helps avoid extreme losses, it does not guarantee protection against losses during market downturns. Diversification relies on combining securities with uncorrelated returns, but correlations can shift unfavorably, leaving the portfolio vulnerable in downturns. - **Option B** is incorrect because systematic risk, being inherent to the market, cannot be diversified away. This risk affects all assets and is not reduced by holding a diversified portfolio. - **Option C** is correct because diversification is a core principle of the portfolio approach. By spreading investments across multiple securities, the risk of a single catastrophic event (e.g., a stock losing all value) is minimized. While diversification may not prevent losses in downturns, it significantly reduces the chance of disastrous outcomes under normal market conditions.

Author: LeetQuiz Editorial Team