Which common investing mistake involves putting all funds into a single investment type?

The concept of over-concentration refers to the practice of focusing a significant portion of one’s investment portfolio in a single asset or a limited number of assets. This strategy can lead to heightened risk because the investor's financial success becomes overly dependent on the performance of those specific investments.

When an investor places all funds into a single type of investment, they expose themselves to higher volatility and potential losses if that investment performs poorly. For instance, if an investor puts all their money into one stock and that company faces challenges, their entire portfolio could suffer substantial losses.

The principle of diversification, in contrast, encourages spreading investments across a wide range of asset types and categories, which mitigates the risk associated with any one investment or sector. Therefore, over-concentration is a critical mistake that many investors must be wary of in order to achieve a well-balanced and resilient investment strategy.