Diversify Your Investment Portfolio

Diversify Your Investment
Portfolio

By www.profitableinvestingtips.com

Diversification is a means of
reducing risk and increasing
opportunity in investing.

http://www.profitableinvestingtips.com/stock-investing/diversify-your-
investment-portfolio

The chances of having a stock
in your portfolio rise
significantly in price goes up
when you have five well-
chosen stocks instead of one.


The chances of losing all of
your investment capital also
go down when you diversify
your investment portfolio
among several stocks in
several market sectors.


Likewise, if a part of your
investments is in property, a
part is in stocks, a part is in
bonds, and a part is in


offshore investments you can
reduce risk and increase the
opportunity for profits.


When suggesting offshore
investment opportunities we
wrote about Three Good
Offshore Investment Ideas, for
example.


Diversify Your Investment
Portfolio to Gain Variety and
Opportunity


When you diversify your
investment portfolio you
invest in a variety of assets.


Because the value of each
investment does not go up or
down in perfect harmony,
diversification averages out
risk, as well as gain.


To the extent that one is
looking to a big gainer, having
more stocks, real estate, or
other assets may serve to
increase the odds of success.


In their book A Random Walk
Down Wall Street the authors
note that the best return in
stocks is often a basket of
about forty small cap stocks.


These stocks are priced low
because of the risk inherent in
small companies.


However, if you diversify your
investment portfolio with a
large number of these stocks,
you


increase the chances of
finding a huge winner which
will negate the effects on the
portfolio of a handful of
losers.


There Is Always a Bull Market
Somewhere


Not all investment vehicles go
up and once or down at once.


As an example, when the price
of oil goes up, the price of oil
company stocks generally
rises.


At the same time the prices of
industrial stocks, hit by the
higher price of energy,
typically go down.


By investing in stocks in
several sectors you can often
average out gains and losses.


The idea here is not to hedge
risk only, however.


Each stock, each investment
needs to be looked at with
thorough fundamental
analysis in order to pick
investments with a


high expected rate of return
and a significant margin of
safety against loss during bad
times.


To the extent that economies
like those of the BRICS nations
are rising faster than those of
Europe


or North America, it may be
wise to diversify your
investment portfolio with
emerging markets in mind.


To the extent that there is a
transparency problem when
investing in China, Russia,
India,


Brazil, or South Africa, it is
often wise to diversify your
investment portfolio with an
eye toward keeping part of
your money in North America.


Choice of Investments when
You Diversify Your Investment
Portfolio


Diversification is not a
substitute for simply picking
good investments.


Investing in gold can be a
good idea under the right
circumstances as can investing
in beer be a good idea.


Investing in oil, investing in
China, and picking new
winners in high tech stocks
can all be profitable
undertakings.


However, a smart investor
picks his stocks
wisely, routinely watches each
investment in his
portfolio, and buys and sells
investments accordingly.


When you diversify your
investment portfolio you do
not commit to a “buy and
hold” strategy.


Rather you choose
investments that fit a rational
approach aimed at increasing


opportunity while also
reducing investment risk.


Diversify Your Investment Portfolio

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Was ist angesagt?

Was ist angesagt? (20)

Andere mochten auch

Andere mochten auch (19)

Ähnlich wie Diversify Your Investment Portfolio

Ähnlich wie Diversify Your Investment Portfolio (20)

Mehr von InvestingTips

Mehr von InvestingTips (20)

Kürzlich hochgeladen

Kürzlich hochgeladen (20)

Diversify Your Investment Portfolio