What Is Diversification? Why You Should Not Put All Your Eggs in One Basket

Should you really put all of your money into one single asset? Let us find out together. Today we learn what diversification is and how spreading money actually lowers your investment risk. Because when everything sits in one asset, a single piece of bad news can shake your whole savings. Diversification simply means spreading your money across several different assets, instead of just one. The key idea here is correlation, which is how much two assets tend to rise and fall together. If your assets do not turn bad at the same time, the gain of one can offset the loss of another. So what really matters is the different behaviour of the assets, not just how many of them you hold. Suppose you have one hundred million tomans; putting all of it in stocks makes it swing very widely. But a basket of half stocks and half gold still earned five percent even in the worst year we imagined. In Iran the dollar, gold and coins usually rise together, so buying all three is not real diversification. An easy route is investment funds, which spread your money across dozens of assets on your behalf. The first mistake is thinking that diversification simply means buying several different things. The second mistake is expecting it to remove whole-market risk, like broad inflation or a war. The third mistake is expecting higher returns; diversification only calms the swings and lowers risk. So build yourself a basket of assets that do not all move together, and you will sleep more easily. The full lesson is on Sahmino, where more of your questions are answered. Got a question? Leave a comment.