Asset Allocation & Risk

Why are investors told to diversify?

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Diversification is a way of reducing exposure to any particular asset or risk by spreading your investment across multiple assets.

Unless asset prices move in exactly the same way, a portfolio that mixes several assets often has lower overall volatility than the individual assets. As the saying 'don't put all your eggs in one basket' suggests, the aim is to reduce the impact that a sharp fall in one asset has on your overall wealth.

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This answer is general financial information as of 14/10/2026, not investment advice. Rules and tax rates change, so please also check the latest guidance from the source institution.