to spread out the money you invest into different types of investments: bonds, stocks, CDs, mutual funds, etc. The idea is to avoid putting all your eggs in one basket. Different kinds of investments do well in different kinds of economic climates. Therefore, if one of your investments drops in value, the other kinds of investments should hold or increase their value.
To reduce risk in a portfolio by spreading investments among a number of different bond or stock issuers or issues that are not perfectly correlated so that losses in any one bond/stock/security do not impact the whole portfolio, and may be partially offset by gains in other securities holdings.