Even if new to investing, you are likely familiar with one of its most basic principles: ‘Don’t put all your eggs in one basket.’ The lesson in this old familiar saying is, if the basket were to topple over, all the eggs could spill out and break at once, leaving you with nothing. By putting your eggs in a variety of baskets, you can help seek to protect your stash against total loss.
When applied to investing, this idea is known as diversification, and the goal of diversifying your investments is to protect your nest egg from the volatility of the market while you are growing it. Please note that there is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification and asset allocation do not protect against market risk.