What are the best options for diversification that will ultimately lead to lower risk of significant losses?

Risk and reward do go hand in hand, but there are ways to mitigate some risk in your portfolio.  One of the first ways is to construct a well-diversified global portfolio.

While there is no way to mitigate risk completely, you can lower it by owning a bit of everything out there. By having stock positions in asset classes that do not perfectly correlate(i.e.- Large Cap stocks vs. small caps, vs. international, vs. emerging markets, vs. real estate, etc.) and by also using mutual funds in order to own thousands of stocks instead of just owning a handful of stocks; thus eliminating  specific company risk.

Most portfolios should also consider holding high quality bonds, specifically ones that are of short and intermediate duration (Don’t go buying 10 and 30 year bonds in other words) Think of bonds as what can anchor your portfolio in rough markets. But don’t go overboard on bonds.

Many people think that if they put all their money in bonds, they are choosing the least risk for at least some reward (as opposed to holding cash). Ironically, if you chose a very low risk portfolio of high quality bonds, you can actually further lower your risk by adding a small amount of the more volatile and risky asset class of stocks. It is counter intuitive, but very often a mix of 10% stock and 90% bonds has more return and less volatility (risk) than 100% bonds.

Further, you can use historical data and Nobel Prize winning economic research to try to attain higher rewards. I wrote about this in an article a few months ago here.

Probably the optimal way to attain a risk and reward balance that is designed for you is to work with a financial professional to not only manage your assets for you, but to help you to attain your goals and increase your chances to live a more comfortable retirement. You can find a CFP near you by clicking here​.  Yes, there are costs, but is very likely to earn you a higher reward, and free up your time to concentrate on other things.

There is no magical solution to completely eliminating risk or portecting against significant losses. Think back a few years to the so-called "flash crash". You can mitigate risk to some degree through diversification. Large company stocks do not move in tandem always with small company stocks. Bonds tend to move more or less in tandem as they are more linked to interest rates than to earnings forecasts or other market noise. There is also an academic study that demonstrates that having 20% of a portfolio in managed futures lowers risk and improves returns, but there is actual market over hte last two years that demonstrates otherwise.

The discipline I have used for more than twenty years with clients is based on the work of Dorsey Wright and Associates expressed in Tom Dorsey's book Point & Figure Charting. "Pn'F" won't completely do away with risk, but it will, if applied properly, lower risk across all asset classes as almost any finacial asset can be charted.