What is diversification in investing?
Where a link is marked *, it is a partner link — we receive commission at no extra cost to you. Links without a * earn us nothing. How we make money.
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.
Last reviewed:
Reviewed by Kaiser Khan
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.
Primary source: moneyhelper.org.uk/en/savings/investing
Part of our Investing & ISAs
This quick answer sits inside our wider investing & isas hub — with sub-guides, calculators and step-by-step explainers on the same topic.
Read the full investing & ISAs guide →