So that means we shouldn’t invest in just one share or company but rather in several at the same time?
Correct. Here’s an example: as we don’t know how the weather will change in the next few months, we could invest in two companies, a parasol manufacturer and an umbrella manufacturer. This means we can make the most of any weather conditions, albeit not quite as much as if we’d invested correctly in just one company. However, we also reduce the risk of investing incorrectly. This also applies to the various investment classes, regions, countries, sectors or currency areas, as they are all dependent on other economic factors. The basic rule of diversification is: the more varied, the better.