Diversification (Diversifikation)
Spreading your money across many different investments to reduce the risk of any single loss.
In short
As of 5 October 2026Diversification means spreading your money across many different investments to reduce the risk of individual losses. Instead of putting everything into one stock, you spread it across many companies, sectors and countries, for example through an ETF holding over a thousand companies. It does not protect you when the whole market falls.
Diversification means not putting all your eggs in one basket. Instead of buying one stock, you spread your money across many companies, industries and countries.
Example: if you put 5,000 euros into one stock and the company hits a crisis, a large part could be gone. If you spread the 5,000 euros over a thousand firms via an ETF, a single bankruptcy barely matters.
Diversification does not protect against every loss. If the whole market falls, a broad portfolio falls too. But it reduces the risk that one bad pick hurts you badly.
Sources
As of 5 October 2026 · Educational content, not investment or tax advice.