The market pays you for taking risk — but not the kind you could’ve avoided for free. Diversification is that free lunch: less risk, same expected return.
Picture your entire savings in one company’s stock. It could be a great company. But one bad quarter — a scandal, a recall, a flopped product — and your money goes down with it. Now picture it spread across 500 companies. One blowup barely registers. That’s the whole idea of diversification.
— Educational, not financial advice.