Diversification

Diversification means spreading money across different investments so one bad outcome doesn’t sink you.

Across companies

Owning 30 companies instead of 1 means one failure hurts a little, not a lot.

Across asset classes

• Equity (stocks): highest long-term growth, biggest swings.
• Debt (bonds, FDs): steadier, lower returns.
• Gold: often holds up when stocks fall.
• Cash: safe, but loses to inflation.

Asset allocation

How you split money across these is your asset allocation. Younger people with long goals can usually hold more equity. Shorter goals need more debt and cash.

Rebalancing

Over time, winners grow and your mix drifts. Rebalancing means selling a bit of what grew and adding to what shrank to get back to your plan.

Diversification reduces risk; it does not remove it.