Image courtesy of criminalatt at freedigitalphotos.net
Here in NH it can get very cold in the winter; in fact it was in the negative digits last week. An outdoor vendor here would sell much more hot chocolate than ice cream. In fact, we have a friend who owns a food truck that targets product for sale during the warm summer months. They quickly realized that only selling ice cream limits their season drastically, so they added cold weather products like hot chocolate to sell year round. This vendor knows the importance of diversification!
Diversification is also very important in stock market investments. An example of this would be if you have $100k to invest and you invested it all in one stock. If that stock lost 90% of it’s value you would have only $10k left. Oh, I shutter at the thought! But if you invested $100k in 10 different stocks at $10k each and ONE of those stocks lost 90% you would still have $91k in your portfolio. Visit the SEC website for more on this topic and tune in this Thursday at 7:30pm EST to our FREE webinar entitled “Where are your eggs?; Asset Allocation” for more information.
What is your diversification ratio mix? Please share…