Answer: Risk mitigate

## Explanation Diversification is a classic example of **risk mitigation**. Here's why: - **Risk avoidance** would mean completely avoiding the risk (not investing at all) - **Risk transfer** would involve shifting the risk to another party (like through insurance or derivatives) - **Risk retention** would mean accepting the risk without taking action to reduce it - **Risk mitigation** involves taking actions to reduce the impact or likelihood of risk Diversification works by: - Reducing exposure to any single asset or sector - Lowering the frequency of extreme losses through correlation management - Decreasing the severity of portfolio losses by spreading risk across different asset classes This aligns perfectly with the definition of risk mitigation: "Risks can be mitigated by reducing exposure, frequency, and severity."

Author: LeetQuiz Editorial Team