Diversification

Diversification means spreading money across different investments to reduce risk. In simple terms, diversification means not putting all your money in one place. Diversification is important because different investments can rise or fall at different times. If one investment performs badly, other investments may help reduce the overall damage to a portfolio. For example, an investor may own stocks, bonds, cash, and funds from different industries or countries instead of owning only one company’s stock. Diversification does not remove all risk. It can help manage risk, but it cannot guarantee profits or prevent losses.