The Egg Basket Rule

Diversification means spreading your money across different types of investments so a single failure cannot wreck you. Own only one stock, and a bad quarter could cut your savings in half.

Own 500 stocks through an index fund, and one company's collapse barely registers. Mix in some bonds and international stocks, and you have built a portfolio that can absorb shocks from almost any direction. Diversification does not eliminate risk — it makes risk manageable.