Diversification means spreading investments rather than relying on a single company, sector, or type of asset. Different holdings can respond differently to changing conditions, which can reduce the impact of one investment performing poorly.
Asset allocation is the broader decision about how to divide money among categories such as stocks, bonds, and cash. Your goals, investing timeframe, and tolerance for losses help frame that decision. There is no single mix that suits everyone.
Owning several funds does not necessarily mean you own different investments. Check their major holdings and areas of focus: several funds can still be heavily exposed to the same companies or industry.
Diversification cannot guarantee a profit or prevent every loss. Review your mix periodically, and understand any fees or tax consequences before making changes. The aim is to understand the risks you hold, not to eliminate uncertainty.
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For general education. Consider your circumstances and local rules before making investment decisions. Figures describe the dates stated in this article and are not live market quotes.
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