Diversification: do not put all your eggs in one basket

The single most effective risk-reduction tool available to any investor is diversification. It costs nothing and reduces your exposure to any single investment failing.

A real example

Ahmed puts all £5,000 into one company. It collapses. He loses everything. Fatima puts the same £5,000 into a halal ETF holding 350 companies. One company fails. It represents 0.3% of the fund. Her loss is £15. Same event, vastly different outcome.

Halal ETFs are the most practical diversification tool for UK beginner investors. One purchase gives you exposure to hundreds of Shariah-screened companies across multiple countries and sectors.

Knowledge check

If one company in a 350-company halal ETF goes bankrupt, what happens to your investment?