Diversification is one of the most important keys to long-term investing success. When you have a well-diversified portfolio, your risk is spread out so that the performance of a single investment won't disproportionately affect your overall portfolio. This is what is meant by the expression, "Don't put all your eggs in one basket."

To achieve the appropriate diversification mix, you need to know your goals, time frame and tolerance for risk before you select your investments. You also need to know how much of each investment to own and when to rebalance your investments.

Finding the right mix of investments can be difficult and time consuming. If you don't have the time or financial expertise to choose your own investment mix, or even if you do, you may find it beneficial to hire a professional financial advisor to help you.

One way to build a diversified portfolio is by investing in mutual funds. Mutual fund managers pool your money with the money of many investors to create a portfolio of investments. You'll need to review a mutual fund's objectives to see if it will help you reach your investment goals. One of the big advantages of mutual funds is that your money is professionally managed.