Definition
Spreading money across different investments so a loss in one is less likely to hurt the whole portfolio.
What it means
Diversification means not putting all your money in a single investment. Spreading savings across asset types, such as stocks, bonds and cash, and within them, across many companies, industries and countries, can reduce the impact of any one bad result. The SEC's Investor.gov explains that diversification and asset allocation can help manage risk, but neither guarantees a profit or protects against loss in a falling market. Funds can offer instant diversification, but owning several funds that hold the same stocks adds little. Holding a large share of savings in your employer's stock is a common concentration risk, since your job and investments then depend on one company. Rebalancing from time to time keeps a chosen mix in place.
Example
If one stock makes up all of a $10,000 portfolio and drops 50%, the loss is $5,000. If it were one of 100 equal holdings, the same drop would cost about $50.
Illustrative numbers only. Your situation will differ.