Diversifying a Stock Portfolio
What is meant by diversifying a stock portfolio? Why do it? How does an investor diversify? Diversifying a stock portfolio is an investment strategy where the investor chooses investments that react differently to varying conditions in the stock market and market sectors. Investors diversify their investments to reduce investment risk. A basic method of diversifying a stock portfolio is to choose five stocks in five different market sectors. Ideally the various market sectors and the stocks react differently at the various points in the business cycle.
6. A basic method of diversifying a stock
portfolio is to choose five stocks in five
different market sectors.
www.CandlestickForums.com
7. Ideally the various market sectors and
the stocks react differently at the various
points in the business cycle.
www.CandlestickForums.com
8. By choosing stocks with different
characteristics, diversifying a stock
portfolio spreads out the risk of
investing.
www.CandlestickForums.com
9. Ideally the investor chooses stocks in
such a way that when one stock,
www.CandlestickForums.com
10. such as a manufacturing company is hurt
by higher interest rates, and drops in
stock price,
www.CandlestickForums.com
11. another, a bank charging higher interest
rates, will see the price of its stock
shares go up.
www.CandlestickForums.com
12. In diversifying a stock portfolio the point
is not just to pick stocks that will balance
each other but picking stocks in more
than one potential area of growth and
profit.
www.CandlestickForums.com
13. Buying stocks in computer
technology, biotech, big oil, consumer
goods, and financials not only reduces
the investor’s
www.CandlestickForums.com
14. risk of a huge loss if one company has
problems but it offers opportunity for
growth in a wider arena.
www.CandlestickForums.com
15. Diversifying a stock portfolio can be
fairly simple and it can be immensely
complicated with lots of
charts, formulas, and the like.
www.CandlestickForums.com
16. A good rule of thumb for beginning
investing in the stock market is to keep it
simple.
www.CandlestickForums.com
17. A good practice is to buy stock in no
more than one company to start with.
www.CandlestickForums.com
18. In fact, smart stock market investing for
a beginner would be to pick one stock at
a time and stop at five.
www.CandlestickForums.com
19. Diversifying is to reduce risk but
fundamental analysis, value
investing, and using tools such as
Candlestick
www.CandlestickForums.com
20. basics to find currently low prices in
good stocks are necessary to find the
best individual stocks.
www.CandlestickForums.com
21. Unless the investor is a professional who
devotes all of his or her day to investing
and stock trading there is only so much
time to devote to following stocks in a
portfolio.
www.CandlestickForums.com
22. Five stocks is typically a sufficient
number for diversifying a stock portfolio
and not too many to keep track of with
tools such as Candlestick analysis at least
once a week.
www.CandlestickForums.com
23. Five stocks are usually not too many for
keeping up with the stock market news
as it applies to each stock and its sector
of the stock market.
www.CandlestickForums.com
24. More complicated stock portfolio
diversification has its place with
institutional investors managing huge
portfolios.
www.CandlestickForums.com
25. For the beginner, keeping it simple is the
best choice.
www.CandlestickForums.com
26. Diversifying a stock portfolio need not
be limited to picking five different
stocks.
www.CandlestickForums.com
27. The investor can also choose to invest in
the futures market, the commodity
market, and foreign currency trading as
well as basic stocks and bonds.
www.CandlestickForums.com
28. As with all investing and trading, success
has to do with an adequate knowledge
base,
www.CandlestickForums.com
29. well practiced, attention to detail, and
sufficient time in the work day to
accomplish what needs to be done.
www.CandlestickForums.com
30. Although there is potentially no limit to
how much an investor can manage
portfolio diversification (and life)
www.CandlestickForums.com
31. there always comes a point where
keeping it basic and simple works as well
or better than excessive variety and
detail.
www.CandlestickForums.com