Risk, Return, and Diversification

Investments come with different levels of risk. Risk and potential return are usually related: investments with a chance of higher returns often also carry a higher chance of loss. Diversification means spreading money across different kinds of investments instead of putting it all into just one. This can reduce the impact of any single investment performing badly, though it does not guarantee a profit or eliminate the possibility of loss. Someone with all their money in a single company's stock has less protection than someone spread across many different investments. Diversification is a tool for managing risk, not a way to remove it entirely.

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