Don't put all your eggs in one basket

The lesson in full

1. If all your money sits in one company and it fails, you lose everything. Diversification means spreading money across different investments so no single one can sink you.

2. Real example: when US energy giant Enron collapsed in 2001, its shares became almost worthless. Many employees had most of their retirement savings in Enron stock and lost their jobs and savings at the same time.

3. Different assets react differently. Stocks, bonds, gold and cash often move in different ways, so a fall in one can be cushioned by the others.

4. Like a street seller with umbrellas and sunglasses: rain or sun, something sells.

5. An easy way to diversify is an index fund or ETF: one purchase, hundreds of companies, across many industries.

6. Common mistake

   Mistake: owning five tech stocks and calling it diversified. If they all depend on the same thing, they fall together. And in some years, like 2022, even stocks and bonds fell together.

7. Key takeaway

   Diversification doesn't remove risk or guarantee profit. It stops one bad bet from ruining you.