When it comes to investing, one of the oldest and most repeated sayings is also one of the smartest: don’t put all your eggs in one basket. It sounds simple, maybe even a little obvious, but behind that bit of wisdom is a core principle of smart investing called diversification. Tied closely to the idea of asset allocation, these strategies help protect your money and give you a better chance of growing it over time—without riding a roller coaster of risk.

Imagine you’re carrying a basket of eggs across a rocky path. If you trip, every single egg might break. But if you spread those eggs out—some in your backpack, some in your pockets, and some in another basket—then a fall doesn’t have to be a total disaster. That’s what diversification does for your investments. It spreads out your risk so that if one part of your portfolio takes a hit, the whole thing doesn’t fall apart.

A lot of new investors make the mistake of chasing the latest trend. Maybe it’s a hot tech stock, a cryptocurrency everyone’s tweeting about, or even putting all their money into one mutual fund. And while it’s easy to get excited about a big winner, the reality is that every investment carries risk. Companies go through rough patches. Markets can swing. And sometimes, unexpected events—a pandemic, a political shift, a natural disaster—can shake even the strongest sectors.

That’s where asset allocation comes in. Asset allocation is how you divide your investments among different types of assets, like stocks, bonds, real estate, and cash. Each asset class behaves differently. Stocks might offer high growth but come with higher ups and downs. Bonds tend to be more stable, offering lower returns but helping cushion the blow when markets dip. Real estate and other assets add another layer of variety. And cash, while not exactly exciting, gives you flexibility when opportunity strikes.

The right mix of assets depends on you—your age, your goals, your comfort with risk, and your timeline. A younger investor with decades to ride out market swings might lean heavily into stocks. Someone closer to retirement might prefer more bonds and cash to preserve what they’ve built. There’s no one-size-fits-all, but the important part is balance. A well-balanced portfolio doesn’t just chase returns; it manages risk.

Let’s say you have $10,000 to invest. If you put all of it into a single tech stock, you might double your money—or lose half of it overnight. But if you spread that money across different industries, countries, and asset types, the performance of one struggling investment could be offset by another that’s thriving. That’s the beauty of diversification: it helps smooth out the bumps.

You don’t have to pick each investment yourself to build a diversified portfolio. Mutual funds and exchange-traded funds (ETFs) are great tools for this. They pool together many investments, so by buying just one fund, you’re already spreading your money around. Some funds focus on large companies, others on international stocks or government bonds. There are even balanced funds that handle asset allocation for you.

It’s also worth noting that diversification isn’t just about spreading your money around randomly. True diversification means choosing investments that don’t all react the same way to the same events. If all your holdings go up and down together, you’re not really reducing your risk. That’s why it helps to include different sectors, industries, and even countries in your portfolio. Global markets don’t always move in sync, and that can work to your advantage.

Over time, your portfolio will naturally shift. Some investments will grow faster than others, and you might find that your mix of assets isn’t balanced anymore. That’s where rebalancing comes in. Rebalancing is simply adjusting your portfolio to get back to your target allocation. It might mean selling a little of what’s done well and buying more of what hasn’t. It might feel strange to sell a winner and buy a loser, but it’s part of keeping your plan on track. Rebalancing helps you lock in gains and manage risk before things get out of hand.

Diversification and asset allocation won’t make you rich overnight. They’re not flashy strategies that promise the next big thing. But they do offer a boring kind of brilliance: they keep your investments working together in a way that supports your long-term goals while helping to protect you from unexpected shocks.

At Very Boring Investment Advice, we’re big fans of this kind of approach. It’s not about timing the market or betting big. It’s about building something solid, something that can weather the ups and downs and still move you forward. Diversification and asset allocation are the steady hands that guide your portfolio through the storms and into clearer skies.

So the next time you’re tempted to throw all your money at the next trending stock or jump on a hot tip from a friend, remember the basket of eggs. A little caution, a lot of balance, and a good mix of investments can go a long way toward a smoother, more successful financial future.