Diversifying your Portfolio Pt.2

Hello! I talked about diversifying your portfolio in an earlier post. To see it click here. Today I’d like to talk more about diversifying your portfolio. Particularly throughout different industries. Those who invest all their money into one industry, maybe the fast-food industry for example, will make lots of money if the demand for fast food goes up, but they’ll also lose a ton of money if the demand goes down. It’s a whole lot safer to invest in as many industries as possible. All of the stocks I own are involved in different industries, including the social media industry and the electronics industry. Let’s go back to the fast food example. Say a person named Jonathan has $1000 he’d like to invest. He notices that stocks in the fast food industry have been going up steadily for quite some time. He puts all of his money into 10 different fas food companies. The next day he finds out the his portfolio is only worth $250. All of his stocks went down because of the discovery of an unhealthy ingredient found in the food restaurants like McDonalds and KFC serve. Now let’s say Jonathan had invested $ 100 into the fast food industry, $100 into the electronics industry, $100 into the entertainment industry etc. He would have lost $75 from the money he’d put into the fast food industry but maybe overall he gained money from all his other stocks. This is the reason why diversifying your portfolio is extremely important.

That’s all for now, Ben