Diversification is an important investment strategy, especially when the market is unpredictable. By spreading your investments across different types of assets—like stocks, bonds, real estate, and commodities—you can reduce risk and improve your chances of making money.

Reducing Risk
When the market is unstable, individual assets can have big price changes. For example, if the market goes down, stocks might crash while bonds could stay steady or even gain value. Owning a variety of assets helps protect your investments. This idea is like the saying, "Don't put all your eggs in one basket."

Better Returns Over Time
Having a diverse portfolio can lead to more consistent returns. Studies show that portfolios with a mix of different assets usually do better over the long run compared to those that focus on just one area. The way assets relate to each other can change over time. This means that effective diversification is not just a one-time thing; you need to keep checking and adjusting your investments.

How Assets Relate
It’s important to understand how different assets work together. When some assets are negatively correlated—like stocks and bonds—a drop in one can be balanced out by a rise in another. By looking at the correlation between assets, investors can choose investments that match their comfort level with risk and their financial goals.

In conclusion, spreading out your investments is not just helpful; it is necessary for managing risk and getting the best returns in a changing market.