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Back to Basics: Diversification

Amy Thompson-Cobb, aged 10, asks Morningstar analyst Jon Miller why diversification is so important when investing

Holly Black 31 October, 2019 | 15:22

Amy Thompson-Cobb: Hello. My name is Amy Thompson-Cobb, and this is Jon Miller. And we today are going to be talking about diversification. What is diversification?

Jonathan Miller: Well, it's a long word, isn't it? So, it's a good question to get to the bottom of. It's about not having all your eggs in one basket. In investing, it's about not just investing in one company, but investing in multiple ones, because over time, they will have different positives and negatives that occur with them. So, you want to have diversification. So, be spread your risk where different things are happening, and you're not just exposed to one company.

Thompson-Cobb: How many companies does the funds usually invest in?

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About Author

Holly Black

Holly Black  is Senior Editor, Morningstar.co.uk

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