An important method to decrease risk and increase chances of gain is diversification. As
an old saying goes: don’t put all your eggs in one basket. Thus, it is less risky to divide one’s
money to buy three of four different stocks instead of putting the whole amount into only one of
them. In the stock market, while one stock may drop in price, others may rise at the same time. If
all one’s funds are in one stock, one stands to lose a great deal of money without any balancing
gain in another stock. On the other hand, when the funds are diversified, many investments can
go down with the gains in others nullifying the losses and even possibly resulting in a net gain in
the overall portfolio.