Unitized risk

Imagine that you have a bunch of toys that you want to take with you on a trip. Each toy has a different value and you don't want to lose any of them. To make sure they are all safe, you put them into a special bag that has different compartments for each toy. If something happens, like the bag gets dropped, only one compartment will be affected and the other toys will still be safe.

This is kind of like unitized risk. Imagine that the toys are investments, and the bag is a portfolio. When you put your investments into a portfolio, you are spreading out your risk. This means that if one investment doesn't do well, you won't lose all your money. Instead, only a small part of your portfolio will be affected.

Unitized risk is when you divide your investments into small parts, called units. Each unit represents a specific amount of money. This way, you can easily track how well each investment is doing. If one investment isn't doing so well, you can sell those units and invest in something else.

So basically, unitized risk is a way to make sure that your investments are diverse and protected from any bumps or challenges along the way. By dividing them up into smaller units, you can easily manage your investments and adjust as needed.