Answer: Risk mitigate

## Explanation Diversification is a classic example of **risk mitigation**. Here's why: - **Risk avoidance** would mean not taking the risk at all (e.g., not investing in risky assets) - **Risk transfer** involves shifting risk to another party (e.g., through insurance or derivatives) - **Risk retention** means accepting the risk without taking action to reduce it - **Risk mitigation** involves taking actions to reduce the severity or likelihood of risk By diversifying the portfolio across different asset classes and correlations, Krista is **reducing the overall portfolio risk** while still maintaining exposure to the market. This doesn't eliminate risk entirely, but it reduces the impact of any single security's poor performance on the overall portfolio. Diversification works because: - Different asset classes have different risk-return characteristics - Varying correlations means some assets may perform well when others perform poorly - This reduces the portfolio's overall volatility without necessarily sacrificing expected returns

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