A common horror story is losing all of one's money betting on a single stock. This is why a vast majority of professional investors diversify into at least 20-30 individual stocks. These days, index funds are ever more popular, and they can hold hundreds of stocks. With so many stocks, investors can earn a typical return without worrying about a catastrophic loss from a single bad company.

This is an exciting time for small investors. Now that many brokerages offer $0 commissions and fractional shares, small investors can build professional-grade portfolios without significant costs. Even a $20 trading commission would be an instant 2% cost for a $1000 trade. For a stock returning 8% per year on average, this cost is about 3 months of potential gains. It's easier than ever for anyone to build a diversified stock portfolio.