What is diversification?
Diversification means spreading your money over many different stocks, industries and countries, so that one bad company cannot sink the whole thing. If one of 30 companies goes bankrupt, you lose about 3%. If it is your only company, you lose everything. Diversification removes the risk you are not paid to take.
On the left everything hangs on one. On the right one can fail without tipping the basket.
A worked example
You have 3,000.
- All in one stock: The company has a bad year and falls 40%. You have 1,800 left.
- Spread over 30 stocks: The same company falls 40%. It costs you 40 — 1.3%. The other 29 decide the rest.
Note that diversification does not make the return higher. It makes the swings smaller — and removes the chance of losing everything on one mistake.
Diversification is more than a number
Ten Danish bank stocks are not diversification. They fall together when interest rates or the housing market turn. Spread across:
- Companies — many, not few.
- Industries — pharma, technology, industry, consumer goods, energy.
- Countries — Denmark is under 1% of the world's stock market.
- Asset types — stocks and bonds behave differently.
The easiest route is one broad world ETF: 1,500 companies, 23 countries, every industry, in one trade.
What diversification does not protect against
If the whole world's stock market falls 30%, a perfectly diversified portfolio also falls about 30%. That is called market risk, and it cannot be diversified away — only waited out. It is the price of being there when the market rises. Diversification protects against one company going wrong. Not against all of them going wrong at once.
The typical beginner's mistake
Buying five stocks that are all "safe picks" in the same industry — and calling it diversification. When the industry is hit, they are all hit. Check whether your stocks could fall for the same reason. If they could, you are not diversified.
How you see it in Kiggo
Kiggo's diversification ring shows on every ETF how widely the fund is spread across countries and industries. Enter your own purchases in Kiggo's portfolio, and you have all your positions in one place — so it is easier to see whether, without meaning to, you have put most of it in one industry or one country.
Related terms
Frequently asked questions
How many stocks do I need to be diversified?
Research suggests most of the benefit is captured with 20–30 stocks across different industries and countries. One broad ETF gives you hundreds in a single trade — that is the easiest route.
Can you diversify too much?
In practice, yes. Five ETFs that all track the world index give no more diversification — just more to keep an eye on. And 80 individual stocks you cannot follow. Diversification should be broad, not messy.
Does diversification lower the return?
It gives the same return as the average of what you own — no more, no less. You give up the chance of hitting the one rocket. In exchange you also give up the risk of hitting the one bankruptcy.
Kiggo explains — Kiggo does not advise. We never tell you what to buy or sell, and key figures can only be compared between companies in the same industry. The decision is yours. Last updated 2026-09-23.
Written by Claus Frisch, founder of Kiggo. Not an adviser, not a bank — Kiggo explains, you decide.
