✨ Featured Lessons · Lesson 10 of 54 · 60 sec

Don't Put All Eggs in One Basket

🥚 Hertz went from $20 a share to bankrupt in about three months in 2020. Enron went from blue chip to zero in 2001, taking its employees' entire retirements with it. The people who lost everything all made the same single mistake — and it wasn't picking a bad company. It was picking only one.

💡 Key idea

Diversify across stocks, sectors, countries, and asset types. One losing investment shouldn't ruin you.

🧠 Why it matters

DIVERSIFICATION = spreading your money across many different investments. If one fails, the others protect you. The most powerful free protection in investing.

🌍 In the real world

🍿 Imagine your whole investment is in one movie theater chain. COVID hits — theaters close — you're wiped out. But if you spread it across 500 different companies (S&P 500 ETF), the theater stock barely matters. Some industries crash, others soar. You always come out OK.

📌 Takeaways

Never have more than 10% of your money in any single stock
Mix stocks, bonds, real estate, maybe some gold
ETFs do this automatically for you

✅ Test yourself

What's the biggest mistake an investor can make?

Investing too little
Putting most of their money in ONE stock or sector
Buying ETFs
Selling too early

Answer: B · Putting most of their money in ONE stock or sector

Concentration = catastrophe waiting to happen. Enron employees who had all retirement in Enron stock lost everything in 2001. Diversification is FREE protection — use it.

Maximum % of your portfolio in any ONE individual stock?

100%
50%
10%
0% (never own individual stocks)

Answer: C · 10%

10% is the general rule of thumb. If a single stock crashes 50%, you only lose 5% of your portfolio — recoverable. With 50%+ in one stock, ONE bad event can devastate years of progress.

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