diversification risk

Diversification risk refers to the chance that, even after spreading investments across different assets, your overall portfolio may still lose value. While diversifying helps reduce the impact of any single investment’s poor performance, it doesn't eliminate all risk. For example, if the entire market declines due to a recession or economic downturn, most or all of your investments may decline together. Essentially, diversification reduces, but does not remove, the risk that your investments could decrease in value due to broader market factors.