Financial Markets Book Financial Markets For The Rest Of Us
An Easy Guide To Money, Bonds, Futures, Stocks, Options, And Mutual Funds
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by Robert Hashemian

Page 263

where it had started. Today this company's shares are worth about $0.0001 per share. Sure if you had gotten in at $0.03 and had managed to sell it at its height, you would have locked in a sizeable profit. But you would have also been an exception to the thousands of investors who eventually ended up with the worthless shares. Now this may seem like an extreme example but there are many more like it around. Some may not rise and fall that quickly, others may not multiply in value to such extent, but the point is that a poorly diversified portfolio, no matter how safe the stocks, is risky and should be avoided. Here are some diversification suggestions:

  • Invest in diversified companies. A company like GE with businesses in broadcasting, finance, plastics, jet engines, and many more industries offers a diversified investment all wrapped up in one stock.
  • Pick stocks from a good variety of industries. Sure you can invest in technology companies, but don't forget about the other sectors too. There is plenty to choose from.
  • Don't forget the dividend-paying stocks. Dividends are the closest you can come to guaranteed returns when investing in stocks.
  • Invest based on your risk tolerance. If you can afford a few hits, bias your portfolio towards growth rather than income. If you want to stay on the safe side, consider more value stocks.
  • If you don't want to do the research, consider mutual funds. (We will cover mutual funds in an upcoming chapter.)

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  • Book Chapters
    Table of Contents Copyright and Disclaimer Foreword Money
    Bonds Futures Stocks Options
    Mutual Funds Retirement Final Words Appendix A

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