Diversification helps you spread your capital across various asset classes. When planning your investments a well-diversified portfolio would help you achieve your goals better as it would help minimize your risk.
Markets are volatile and hence the performance of a particular investment does not always consistently outperform other investments. When your investments are spread across various asset classes it ensures a steady and consistent return in the long run. Diversifying your portfolio does not guarantee profits or higher returns it just provides a cushioning to your investment portfolio.
When planning your investment portfolio putting down your objectives, goal, risk appetite, and time horizon is a must. This would help you better understand when you would require your capital and how much risk you are willing to take. You can also invest some amount in liquid investment tools for the emergency corpus. All this could be taken into consideration only if your investments are well planned. Also, diversification does not mean spread your capital across every fund or investment tool. You would have to base this decision depending on the factors you jotted down earlier.