Diversification
Diversification means spreading money across investments that do not all move together, so that a bad outcome in one does not take the whole portfolio with it.
The logic is that different assets respond differently to the same event. Holding twenty companies in one sector is far less diversified than it looks, because the thing most likely to hurt one of them will hurt all twenty at once. Genuine diversification requires holdings whose fortunes are driven by different forces.
It works across several dimensions at once: across asset classes such as equities, bonds, and cash; across sectors; across geographies; and across time, by investing gradually rather than all at one moment.
What diversification removes is specific risk — the danger tied to one company or one industry. What it cannot remove is market risk, the risk that everything falls together in a broad crisis. Correlations between assets also tend to rise sharply in exactly those moments, which is when diversification helps least.
It is possible to overdo it. Holding so many positions that no single one can meaningfully affect returns produces something close to an index fund, but with more cost and more work. For most people a broad, low-cost fund achieves the same effect more efficiently.
TrustFinance reviews the platforms and brokers through which diversified portfolios are built and held, so you can compare costs and protections across providers.