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Lesson 4 of 6
Money · Guided lesson

Build a diversified core

Use broad exposure to reduce dependence on one company, sector, or prediction.

About 30 minutes • Finish with a concrete deliverable
Fidelity InvestmentsWhat Is Diversification?YouTube
Course primer

What Is Diversification?

From Fidelity Investments. Watch here or open it on YouTube .

Use Fidelity’s diversification examples to audit your proposed holdings for overlap, sector concentration, and dependence on one market segment.
Before you begin

What this lesson is really solving.

A core portfolio should be broad enough that success does not depend on one company, theme, or prediction. Read the fund objective, holdings, index, expense ratio, trading costs, and overlap with anything you already own before buying.

Why this works

Understand the idea before touching the steps.

Diversification trades the chance of being exactly right for resilience against being catastrophically wrong.

Do this

Follow these steps in order.

Take the action in each step; then use the deliverable below to prove the lesson is finished.

  1. 1

    Read the fund objective and holdings to learn what market it actually tracks.

  2. 2

    Compare expense ratios, trading costs, minimums, tax characteristics, and overlap—not just past performance.

  3. 3

    Choose an allocation simple enough to rebalance and understand; one diversified all-in-one fund can be a valid structure.

  4. 4

    Document what would justify changing the plan, excluding headlines and short-term performance.

Worked example

See the standard in context.

Instead of choosing five popular technology stocks, Maya compares a broad-market index fund, an international fund, and a bond fund. She notices that two different fund names own many of the same largest companies, so adding both would not create as much new diversification as it appears.

Quality check

Inspect before you move on.

  • You inspected the objective, top holdings, expense ratio, and index methodology.
  • No single company or narrow theme accidentally dominates the plan.
  • You can explain what each holding contributes that the others do not.
Make it real

Your deliverable

A one-page portfolio map showing each holding’s role, weight, cost, and overlap.

Common mistake

Watch for this

Owning many funds that all hold the same large companies and calling that diversified.

You’re ready when

Prove it—don’t just recognize it.

You can explain what each holding contributes that the others do not.

Objective evidence · 3 questions

Quick knowledge check

Answer from the lesson—not from confidence alone. Score at least 2 of 3 to unlock completion.

Not yet passed

This curriculum-aligned check is scored automatically and stored with your account when signed in. It is an objective learning signal, but it has not yet been independently validated as a standardized assessment.

1Which action belongs in the recommended process for “Build a diversified core”?
2Which result is the clearest evidence that this lesson’s work is complete?
3Which choice matches the failure this lesson specifically warns against?
0 of 3 answeredEach question measures the action, evidence, or failure condition taught above.
Useful for this course

Tools, templates, and references

Compound growth calculatorModel contributions, time, and a hypothetical return.
Goal planner workbookBuild an auditable investing scenario in Excel.
Check current detailsReferences reviewed September 9, 2026. Lesson exercises are editorial synthesis; official rules come from the linked sources.
SEC Investor.gov — Introduction to investingFINRA — Investing basics
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One check remains

Pass the knowledge check above first.

Completion unlocks after a score of 2 out of 3. Then confirm that you produced the lesson deliverable.

Go to the knowledge check