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Diversification Explained: A Complete Beginner's Guide to Reducing Investment Risk Investing can help you build wealth over time, but every investment carries some level of risk. Prices can fall, companies can struggle, industries can change, economies can enter recessions, and unexpected events can affect financial markets. One of the most important principles investors use to manage these risks is diversification . Diversification means spreading your money across different investments instead of putting everything into a single asset, company, industry, or market. The basic idea is simple: if one investment performs poorly, the impact on your overall portfolio may be reduced because other investments may perform differently. For example, imagine an investor puts their entire investment portfolio into shares of one company. If that company experiences serious financial problems, the investor's entire portfolio could be affected. If the same investor spreads their money across...