Diversification means the distribution of risk. A beach vendor who only sells sunglasses will do good business on sunny days, but will sell very little when it rains. Had they supplemented their range with umbrellas, they might also make sales on rainy days. This principle also applies to investments: If, for example, you invest in just one company, the danger of total loss is greater than if you had invested in many companies. Or in one share fund that invests in many companies and so spreads risk broadly. Diversification costs hardly anything and is most easily realized with investment funds.