Safe Mode Stock Trading by Syd Read

Author:Syd Read [Read, Syd]
Language: eng
Format: epub
Publisher: Lulu.com
Published: 2017-03-04T00:00:00+00:00

Diversification

When you choose companies to include in your list, you should always consider that your selection is diversified. This means that the companies you have chosen differ from each other based on their industry sector. Why do we do this?

Diversification helps to add more safety to your portfolio, you heard before the saying "Do not put all your eggs in one basket", and it is true. Imagine that, with all your money you bought shares in three companies that do a similar business, let's say they work in the telecommunication field, imagine what will happen if this sector (or industry) faced difficulties in the future, or special hard regulations, there will be a downtrend, and your whole portfolio will go down with it.

It is safer to select companies that conduct different types of businesses. Industry sectors are various; you can choose companies in the financial sector (like banks, insurance and brokerage firms), communication sector (telecommunication services, or infrastructure development companies), Technology (Internet, software and hardware), biotechnology, transportation, manufacturing, food, mining, entertainment and other industrial sectors. This will decrease the overall risk of your portfolio, and once a certain sector gets a hit, you will only have a partial hit and not an overall one.

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