Diversification
Diversification means spreading investments so one bad outcome does not sink your whole portfolio.
Why this matters
You cannot remove all risk, but diversification can reduce avoidable single-company or single-sector risk.
Simple example
Instead of buying one stock, you buy a broad ETF that holds hundreds of companies.
Common mistakes
- Owning many funds that all hold the same top stocks.
- Assuming diversification guarantees gains in every year.
- Over-diversifying into products you do not understand.