LESSON 13 OF 16 · 2 MIN
Diversification: spreading your risk
IN SHORTOwning several different investments means one bad result cannot sink you. Spread across companies, sectors and markets.
Any single company can disappoint: a profit warning, a failed product, a lost contract. If all your money is in one company, one piece of news decides your result.
- Spread across several companies.
- Spread across sectors: banks, energy, healthcare and technology react to different news.
- Consider different markets and asset types too.
- Funds and investment trusts hold many companies in one investment.
KEY POINTDiversification does not stop losses. It stops one loss from being a disaster.
Related companies often move together. Two oil producers are less diversified than an oil producer and a supermarket. TradingFloor AI's sector context shows these links.
Try it: Build a watchlist across different sectors (free account).
Create a free accountEducation only. TradingFloor AI does not give investment advice. Prices can fall as well as rise and you may get back less than you invest.