By Ziv Shay | Updated June 2026

Diversification

Spreading investments across many assets so that no single loss can sink your portfolio.

Diversification is the practice of not putting all your eggs in one basket. By holding many uncorrelated investments — across companies, sectors, and asset classes — you reduce the risk that any single failure devastates your wealth. Broad index funds deliver instant diversification, which is a core reason they are recommended for most investors.

Example

Owning a single company’s stock means a scandal could wipe out your savings. Owning a total-market index fund means one company’s collapse barely moves your balance, because it is one of thousands of holdings.

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