Module 8 ยท Building a Portfolio and Managing Risk
Spreading across companies, sectors and sizes reduces the damage any single failure can do.
Diversification means not putting all your money in one stock or sector. If one company fails, a diversified portfolio is protected.
Spread across different sectors, company sizes and even asset classes. Correlation matters - owning ten banks is not really diversifying.
Diversification does not remove risk or guarantee returns, but it smooths the ride and protects against concentrated losses.
Example: Nifty 50
A Nifty 50 index fund instantly diversifies across 50 large companies and many sectors - a simple way for a beginner to avoid single-stock risk.
Owning shares in ten different banks is:
How many different sectors does your own portfolio (or a fund you hold) cover?