Investing glossary
Diversification
Diversifying means spreading your money across assets that do not all move the same way in response to the same event, so a bad outcome in one of them does not drag down your entire wealth.
Diversification happens at several levels at once: by company (an index fund already spreads across hundreds or thousands), by country or region, and by asset class (combining equities with bonds or other assets).
Diversifying does not remove market risk — if the global stock market falls, your portfolio falls — but it does avoid the specific risk of a single company, sector, or country ruining your wealth.