Function

• Diversified investments help improve returns and balance the risk tolerance of a stock portfolio. With diversified investments, the possibilities of earning higher returns increases with patience.
  
  

Significance

• According to Forbes, investors with the best diversification can last in the markets longer than individuals placing all of their money into one investment vehicle.
  
  

Benefits

• Investors can use a stress test to determine which investments can survive during a financial crisis, then change their picks accordingly.
  
  

Warning

• Do not diversify your stock portfolio too much or you will lose more than you gain. Too much diversity causes frustrations and throws off balance of risk tolerance.
  
  

Famous Ties

• Warren Buffett, Benjamin Graham, and Peter Lynch conquered the stock market by diversifying their portfolios to create wealth.