How would spreading out your investments reduce the risk of losing all the money you have invested?

How would spreading out your investments reduce the risk of losing all the money you have invested?
This is a prominent investment criterion known as "diversification", where investors are advised to diversify the their investments by putting them in different types of investment pools (e.g. bank deposits, government bonds, corporate bonds, shares, etc) spread out across different business firms, industries, countries and geographical zones, whereby, investments are not expected to fall all at one time.
Importantly, investors need to understand that while diversifying their portfolios they would be forgoing higher returns for lower ones, but positively, this is also seen as exchanging riskier investments for lower ones.
Diversification is seen as the mitigation of unsystematic risk.