DayCents

Diversification

Diversification means spreading your money across many investments so no single one can sink you — the financial version of not putting all your eggs in one basket. It's the one 'free lunch' in investing: it lowers risk without necessarily lowering expected return.

A single low-cost total-market index fund already holds thousands of companies, delivering broad diversification in one purchase. Adding bonds and international exposure diversifies further across asset types and economies.