Which term describes a risk management strategy that incorporates various investments to limit exposure?

The term that describes a risk management strategy incorporating various investments to limit exposure is diversification. Diversification involves spreading investments across different asset classes, sectors, or geographical regions, which helps mitigate the impact of any single investment's poor performance on the overall portfolio. By holding a mix of investments, an investor can potentially reduce volatility and achieve more stable returns over time. This strategy is based on the principle that not all asset prices move in the same direction, so losses in one area may be offset by gains in another.

In contrast, concentration refers to a strategy where an investor puts a significant amount of their capital into a small number of investments, increasing risk exposure. Leverage involves using borrowed funds to increase the potential return on investment, which can amplify both gains and losses. Speculation entails making high-risk investments to profit from short-term price movements, often without regard for underlying asset fundamentals. These strategies do not focus on risk management in the same way diversification does, making diversification the correct choice for this question.