Which of the following describes diversification in saving?

• A. Spreading money across different types of accounts or investments to reduce risk
• B. Putting all money into one stock
• C. Not saving at all
• D. Keeping money only in cash

Answer: (A)

Diversification means spreading money across different types of accounts or investments to reduce risk. If money sits in only one place, a setback in that area could hurt a lot. By mixing savings accounts, bonds, stocks, or other options, you’re less likely to lose everything because different investments can perform in different ways. It’s like not putting all your eggs in one basket—if one basket has a bad day, the others can still protect some of your total savings. The other ideas don’t fit because putting everything into one stock relies on the fate of just one company, not a mix; not saving at all means your money doesn’t grow and can lose value over time to inflation; keeping money only in cash isn’t spreading risk across different types of assets, so it isn’t diversification.