Intermediate
Diversification packs
Baskets reduce single-name drama — they do not erase market risk. Education only — not a recommendation to buy, sell, or hold anything.
What diversification can do
- Reduce the impact of one company failing.
- Spread sector and style exposures (if the pack is truly broad).
What it cannot do
- Delete broad market drawdowns.
- Fix bad behavior or reckless sizing.
- Turn correlated assets into independent coins.
False diversification
Ten tech names can still be one bet. Look through to factors: sector, geography, credit, duration.
Packaged ≠ automatically diversified
Some funds are concentrated by design. Read the objective. “Fund” is a wrapper, not a diversification certificate.
Practice tip: Read Diversification vs concentration, then journal fake portfolios on /portfolio/.