Why Investing in Multiple Stocks Isn't Enough to Keep Your Money Safe
You don't need to be an investing genius to understand the importance of a diversified portfolio. If you put all your money in a single stock and that company goes out of business, you lose everything. Spreading your money around helps reduce this risk. But if you're just putting your money in stocks, you're probably experiencing a false sense of security.
Stocks have incredible earning potential, but they're highly volatile. The S&P 500 -- a market index that tracks 500 of the largest companies in the U.S. -- has seen annual returns of over 30% and losses of nearly 40% in the last 30 years. If you'd invested all your money in an index fund tracking the S&P 500 over that time, you'd see huge gains some years and devastating losses in others.
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Source Fool.com
