What is diversification with in the contextof financial managent?

Diversification of one's portfolio (financial management) comes from having those monies placed amoung different asset classes such as stocks (equities), fixed income (bonds), real estate, cash, and alternative investments (hedge funds, collectables, etc.). These assets should also be diversified amoungst there respective classes. Stocks should be broken down to large cap, mid cap, and small cap. Fixed income should be broken down to corporate bonds, governmant bonds, and international bonds. Alternatives should be a smaller slice and all of these asset classes should be broken down based on one's risk tollerance and time horizon. Meaning that a 25 year old working professional will generally be allocated higher in equities than a 65 year old retiree. If you're looking for an easy way to accomplish all of thee above you may want to look at well diversified portfolio of ETFs or consult a good financial advisor for guidance.