Diversification

Example

Say you put $10,000 into a single stock and it falls 50%: you lose $5,000. Spread across 20 stocks at $500 each, the same collapse in one holding costs $250, or 2.5% of the portfolio. Twenty stocks can still fall together in a broad sell-off, though, which is why portfolios often add assets that tend to react differently, such as bonds or sukuk.

Hypothetical numbers, for illustration only.