Don't put all your eggs in one basket
Lesson 5 of 12 in our free Investing Basics guide: a 5-minute money game with the key points below.
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Questions you'll answer
Which pot is most diversified?
Quick facts
- A fund tracking a broad global stock market index → Diversified. Thousands of companies in one go.
- All your money in the company you work for → One basket. If it struggles, you could lose your job AND your savings. Double whammy.
- Mixing shares, bonds and cash → Diversified. Different types of investment behave differently.
- Three different meme coins → One basket. Three tickets on the same rollercoaster isn't diversification.
- Myth: “Diversification removes all risk.” — It reduces the risk from any single investment, but whole markets can still fall.
- Fact: “Owning lots of investments that all move together isn't very diversified.” — True diversification means things that don't all rise and fall at the same time.
- Fact: “A single fund can give you a slice of thousands of companies.” — That's one of the main reasons funds exist.