Understanding Diversification in Stock Trading to Avoid Losses

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It is important to have a diversified portfolio in order to minimize risk.

What Is Diversification?
-A variety in your pool (a mix of companies, e.g. tech, oil, industrial, pharmaceutical)
-You want to have a mix of industries so that if one industry has a bad year, the rest of your investments still have the potential to do very well
-If you invest everything in one industry and it does poorly, you’ll lose money in all of your investments
-Example: If all of your stock in technology companies (Apple, Google, Microsoft) and technology takes a big hit, all of your stocks go down.
-You are taking a larger risk if you confine yourself to one industry.
-Keeping your portfolio diversified is especially important if you are new to the stock market.

#diversification #stocktrading #tradingdiversification #tradingstocks #diversify

Posted at: https://tradersfly.com/blog/understanding-diversification-in-stock-trading/

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