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- Consider stock options to mitigate risk. (We will cover options
next.)
- Don’t over-diversify. As good as diversification is, there comes a
point where it is no longer serving the objective. By overdiversifying,
your portfolio is spread too thin, requiring more
time to manage, more money to pay towards commissions, and
it becomes more prone to mistakes. Excessive diversification is
perhaps no better than no diversification at all. As a guide, a
portfolio of about 10 reputable stocks (including some blue
chips) from various industries should suffice. Throw in a couple
of high-risk stocks to spice it up, if you like a little dabbling.
Investing in stocks is like nutrition. A balanced diet is the best
way to keep the body and mind healthy. A well diversified
portfolio would do the same for your investment returns.
Moderation is key.
Brokerage Firms
So you are ready to start investing. Where can you turn? A brokerage
firm, of course. Even if you wanted to start a DRIP account (which does
away with using a broker), you would still need to use a broker for that
initial share you are required to have. Today there are plenty of
brokerage firms to choose from. Most fall within one of these three
categories:
Full Service Broker — With a full service broker you are assigned a
live broker you can actually interact with. Your broker is there to guide
you with your investment decisions and warn you about potential
hazards. Full service brokers are there for you, so you can call them
anytime to get advice or just simply place orders. Full service brokers
usually have access to a vast amount of financial data in real time and …
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