When you invest in a mix of different types of investments, you are diversifying. Diversification means lowering your risk by spreading money across and within different asset classes, like stocks, bonds, and cash. By diversifying your portfolio, you can better weather market ups and downs while maintaining your investment’s potential for growth.

According to the Schwab Center for Financial Research, you should be concerned if a single stock accounts for 10% to 20% or more of your total stock investments. Generally speaking, the wider the number of holdings, the greater the diversification benefits. If you only hold two or three stocks in your portfolio, it won’t be enough to reap the benefits of diversification.