How To Build a Diversified Stock Portfolio
Why it’s critical to have a healthy balance of different investments
It’s common for new investors to hear financial pros say, “Make sure you have a well-diversified portfolio.”
What exactly does that mean?
Sometimes it means you should have a healthy balance of stocks, bonds, cash, and other investments so you’re not taking on too much risk.
But in this article, I’m going to focus specifically on stock market investing and how to diversify your stock portfolio.
What Is Diversification?
Diversifying your portfolio involves buying enough different stocks so that you aren’t accidentally placing too big a bet on any one strategy or area.
Put simply, “Don’t put all your eggs in just one or two baskets.”
The goal of portfolio diversification is to reduce unnecessary risks that could interfere with your investing strategies and goals.
For example, let’s pretend you want to invest in value stocks. You’re convinced they’re a good long-term investment so you plan to invest your money using a value strategy.
If you were to research value stocks and then put ALL your money into your #1 favorite…
