Don’t put all your money into one stock, one platform, or one property

As long as multiple assets don’t all rise or fall in perfect unison, spreading your money across them keeps your average expected returns the same, while reducing the ups and downs of your account balance. Conversely, if you invest all your funds in just one stock, platform, or property, any trouble with it directly impacts your entire portfolio.

Cost

No cost at all. The hard part is accepting that you won’t always pick the single most profitable option.

Benefit

When several assets do not move in perfect lockstep, diversifying your investments maintains your expected returns while lowering overall volatility. This is the core conclusion of Markowitz’s 1952 portfolio theory, which has remained foundational for decades. On the other hand, putting all your money into one single stock or platform means its variance becomes your total portfolio variance — any rise or fall in its value directly affects your portfolio, with no other assets to offset losses when problems arise.

Notes

This is rated as a B grade because the original academic paper relies purely on mathematical derivation, without providing concrete figures on exactly how much diversification reduces potential losses. Diversification can only lessen the fluctuations of your portfolio balance, it does not guarantee you won’t suffer any losses. Buying broad-based index funds (see item 17 in this section) is the easiest way to achieve effective diversification. This information is not intended as investment advice.

Sources · 1

1. Markowitz, H. (1952). Portfolio Selection. The Journal of Finance, 7(1), 77–91. doi.org/10.1111/j.1540-6261.1952.tb01525.x