Diversification
Also known as: risk spreading, asset allocation, portfolio diversification
Diversification means spreading your money across different investments so that the loss of any single position doesn't endanger your entire wealth. The basic rule: don't put all your eggs in one basket.
How does diversification work?
Instead of putting everything into a single stock, you invest in many different ones — across industries, countries, and asset classes. An MSCI World ETF automatically diversifies across 1,500+ companies in 23 countries. If one company goes bankrupt, you barely notice.
Why is it so important?
Nobody knows which stock will rise or fall tomorrow. Diversification protects you from this uncertainty. Historically, broadly diversified portfolios have always generated positive returns over the long term — even through crises.
BudgetHeld says
In the BudgetHeld tool, you plan your monthly contribution under 'Investing'. How you invest it is your decision — but a broadly diversified ETF savings plan is the simplest and safest entry point for most families.
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Written by David El Dib — Financial expert & founder of MoneyTalk