Diversification

You've heard the phrase, "don't put all your eggs in one basket".
That's the basic idea behind investment diversification and asset allocation. Diversification – spreading assets across a variety of different investments – is perhaps the single most important rule you can follow when investing, since it helps reduce your overall risk. You can diversify by asset category, industry, sector or geographic region to help create the foundation for a well-balanced portfolio.

Combining a variety of investments that are unlikely to move in the same direction at the same time helps reduce the risk associated with mutual fund investing as each one responds differently to changes in the marketplace. If you have a variety of investments, a decline in one may be counterbalanced by those that remain stable or rise. You can also consider investing in principal protected products as another way to manage investment risk.

Developing a balanced portfolio also involve asset allocation
A key concept in financial planning, asset allocation involves investing proportionately among different kinds of assets, such as stocks, bonds, money market investments and cash. The percentage of your investment dollar placed in each category depends on your tolerance for risk, time horizon and your expectations for returns.