You’re likely familiar with the expression “don’t put all your eggs in one basket.” This saying sums up why it makes sense to “diversify” your investments.
Diversification means that you spread your money across a variety of different investments. For example, rather than putting all your savings into a single stock you invest in a mix of stocks and funds.
If all your money is invested in a single stock and that stock's value declines, the entire value of your account (the money you invested) declines. But if you spread your money across different stocks and other types of investments, this decreases your risk. When one investment declines in value, another may rise. So, diversification helps reduce the impact that a single investment can have on the overall value of your account.
Here are some basic steps you can take to diversify your investments beyond a single stock:
The more you diversify, the more you can reduce your level of risk.
Read more: Diversifying with index funds
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