Diversification is the key to all smart investing.

But what does it mean exactly to be diversified? In this Stash Explains video, we’ll show you how diversification can help you reduce volatility and risk in your portfolio, by seeking to invest your money in a variety of assets.

You can find out more about how diversification works in our latest Stash video.

Diversification: Explain it to me now

Diversification means you’re not putting all of your eggs in one basket, so you can better weather the stock market’s ups and downs. That means you won’t put all of your money in too few stocks, bonds, or funds.

When you’ve diversified your portfolio, it will hold a variety of investments that are not all subject to the same market risks, including stocks, bonds, and cash, as well as mutual funds and exchange-traded funds (ETFs).

By diversifying, you’ll be choosing investments in numerous economic sectors—not just the hot industry of the moment—as well as in different geographies around the globe.

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