Diversification spreads your capital across multiple uncorrelated assets to reduce the impact of any single loss. It doesn't eliminate risk, but it smooths returns and prevents one bad bet from ruining your portfolio.
Hold 10-20 stocks across different sectors.
Avoid putting >15% in one stock, >30% in one sector.
AI and tech stocks are highly correlated -- owning 10 AI stocks
is NOT diversification; they often all fall together.
Stocks + Bonds: bonds often rise when stocks fall.
Stocks + Gold: gold is a hedge against systemic risk.
ETFs (SPY, QQQ, XLK): instant sector diversification in one ticker.
Geographic: US + international = less exposure to US-specific risk.
Owning 50+ individual stocks is effectively an expensive index fund.
You won't beat the market with that many positions, but you'll pay more in fees.
Concentrate on your highest-conviction ideas -- diversify enough to survive any single stock disaster, not so much that nothing matters.
Related: Position Sizing • Stop Loss Orders • Bull Market vs Bear Market