Diversification

Training 665 minutesdiversification

You are 38, work at a big company and get part of your bonus in its stock. It has grown for 5 years and now makes up 70% of your savings.

Training goal: Spread your risk across baskets

Situation

1. 70% of your money is in your employer’s stock. Your paycheck comes from them too. What do you do?

2. After selling some, you buy five different funds. Later you see all five hold the same big tech companies.

3. All your stocks are from one country, your own. Its economy could stall for years.

4. Stocks fall 30%. You hold only stocks, no bonds and no cash reserve.

List all your investments and find your largest position. Over 10%? Plan how to trim it.

What is diversification in simple terms?

Spreading money across different investments so one failure cannot sink everything. In short: do not put all your eggs in one basket.

How many stocks do you need to be diversified?

Studies suggest at least 20-30 stocks across industries. A broad index fund with hundreds of companies is easier.

Does diversification protect against losses?

It cuts the risk of one company or country failing, but not whole-market drops. Bonds and cash help with those.

Numbers are illustrative. A game, not financial advice.