“Diversification is important in investing” is something it’s likely you have noticed before. Diversification is the practice of growing money between different investments to reduce risk. But why is it important to trading as well as your money? Eat your fruit and veggies! Your parents wanted you to have a diverse, well-balanced diet.
Diversification is important in what you eat because it keeps you healthy. Diversification is important in trading since it helps your cash make you more income. A restaurant will sell hot espresso products and iced coffee products. During cold weather, it’s easier to sell hot coffee but harder to sell iced coffee.
And when hot weather arrives, the change holds true. By offering both items – in other words, by diversifying their products – the risk can be reduced by the vendor of losing profits in any given season. Don’t put all of your eggs in a single basket. Thinking about diversify? If all of your eggs (shares) are in one basket so you drop it, you lose everything. However, if you have 10 eggs (shares), each using its own basket and you also drop one, you’ll still have nine eggs (shares) left. The sharp drop in stock prices in 2008-2009 is resistant enough that putting all of your eggs in a single basket is a risky strategy.
Individuals make investments their money in different eggs. You’re investing in assets. ONCE I was a money moron, I bought several individual stocks. I thought I had been diversified. …