Decoder · How risk works

Diversification

Spreading money across many holdings so no single company's bad year decides yours. A fund that holds hundreds of companies is diversified by construction. Diversification does not stop market-wide drops — when the whole market falls, a diversified fund falls too, just without the single-company disasters on top.

For your first $100: Your first $100 inside a broad fund is already spread across hundreds of companies. Diversification is the reason beginners start with funds, not with one company's stock.

Asset allocation, in plain words Risk, in plain words

← Expense ratio · All 50 cards · Asset allocation →

See this word inside your order