Diversification is generally considered to be a good strategy in investing because it can help to reduce overall risk.
Diversifying means spreading out investments across a variety of assets, such as stocks, bonds, real estate, and commodities.
By not putting all of your eggs in one basket, you can limit your exposure to the risk of any one particular investment underperforming.
Diversifying can also help to smooth out returns over time and reduce the volatility of your portfolio. This is because different assets tend to perform differently at different times. For example, while stocks may be performing poorly, bonds may be performing well. By having a diversified portfolio, you can still earn positive returns even if one of your investments is performing poorly.
Furthermore, it can also increase the chances of earning some returns, as the assets you have invested in, won't be correlated with each other, so even if one of them is performing badly the other can pick up the slack.
It's important to note, diversification alone doesn't guarantee a profit or protect against a loss, and it doesn't eliminate the need to perform due-diligence on the investments you make, but it can be an effective tool for managing risk and increasing the chances of a successful investment outcome.