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Why diversify your investments?
In short: Diversifying means spreading your money across many companies, sectors and countries so that no single piece of bad news can wipe you out. It is the closest thing to a free lunch in finance: less risk without necessarily less return.
A simple example
With a single stock, if the company goes bankrupt you lose everything. With 500 through an ETF, one bankruptcy costs about 0.2%.
Diversify what?
Companies, sectors (tech, health, energy…), countries and asset types (stocks, bonds, savings). Ten US tech stocks are not really diversified.
Limits
In a crash, almost all stocks fall together. Diversification protects you from one company's accident, not from a general crisis.