Diversification

Not putting it all in one place.

How it works

Holding many uncorrelated assets means one failure does limited damage. Twenty holdings across different industries and countries removes most specific risk.

Twenty companies in one sector is not diversified.
Holding your employer's shares concentrates job and investment risk together.

Asset allocation

The split between shares, bonds and cash explains most of the variation in outcomes over time, far more than which individual holdings were picked.