# What is diversification in investing?

> Quick answer · Last updated 4 July 2026

Canonical HTML: https://moneyguide.org.uk/answers/what-is-diversification-in-investing/
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## In short

Spreading money across different assets, regions and sectors so one bad investment does not wipe out your portfolio. A global index fund diversifies across thousands of companies in one holding.

Diversification reduces company-specific risk but not market-wide crashes — equities can fall together in recessions.

Bonds, cash and property often behave differently from shares, smoothing returns over time.

See UK vs global equity weightings and risk tolerance guides.

## Related

- [UK vs global equity funds](https://moneyguide.org.uk/investing/uk-vs-global-equity-weightings/)
- [Index funds vs active funds](https://moneyguide.org.uk/investing/index-funds-vs-active-funds/)
- [Risk tolerance explained](https://moneyguide.org.uk/investing/risk-tolerance-investing-explained/)

## Primary source

moneyhelper.org.uk/en/savings/investing

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Independent UK money guidance from [Money Guide](https://moneyguide.org.uk). Information only — not regulated financial advice.