All terms
Diversification (Diversifikation)
Spreading your money across many different investments to reduce the risk of any single loss.
Diversification means not putting all your eggs in one basket. Instead of buying one stock, you spread your money across many companies, industries and countries.
Example: if you put 5,000 euros into one stock and the company hits a crisis, a large part could be gone. If you spread the 5,000 euros over a thousand firms via an ETF, a single bankruptcy barely matters.
Diversification does not protect against every loss. If the whole market falls, a broad portfolio falls too. But it reduces the risk that one bad pick hurts you badly.