Diversification

Diversification means spreading investments across different companies, industries, or asset types so that a single bad outcome does not sink the whole portfolio. The opposite is concentration, holding a small number of positions where any one of them can meaningfully move the total result.

Diversification does not eliminate risk, the whole market can still fall together, but it does reduce the damage from company-specific and industry-specific problems, since a decline in one holding can be offset by stability or gains elsewhere. Broad index funds and ETFs are a common, low-effort way for investors to diversify.