Can anyone explain diversification?

[amz 10]

Im interested in hearing more on this topic. Is it good to diversify your portfolio in just the stock markets? The markets have been changing the past decade and there is alot more opportunity beyond stocks. The typical investor will only look to dump his or her money in the stock market.

 

Is it wise to start looking in various markets to diversify? Such as owning currencies, gold, stocks, and possibly options. Comments will be appreciated .

[modric 10]

I never liked much diversification. If you are in many jobs, you will have many worries. You will also hard be good on all fields. I've never found people who don't know what they are selling as attractive. This applies if we are speaking of some real work. But even in purely financial business, I've found that successful people are on one field mostly.

 

Other thing is where to invest money you are earning with one job.

 

I'm an one-job-at-the-time man. Can't stand to work three things simultaneously. So your question is rather personal - what fits to you, what do you want...Peace, money, good work done...

[Soultrader 12]

I also tend to be a one-job-at-a-time person. I dont like sticking my nose in something I have no advantage in. Most successsful people may do multiple projects but they all tend to be related to one another. I think one is better off sticking to one field and exceling in it.

 

In terms of diversifying your stock portfolio, you can minimize risk by diversifying in different sectors. You can also invest it in the futures market to hedge your position. I enjoy holding a few things long term but it if wasnt for the short term trading, I would be penniless.

[modric 10]

I'm trying to stick with a job I'm good at.

I found as useful this kinds of "diversification":

 

I do not stick with one site, one forum, even if I was there a long time. I'm using a forum if I can make useful friends there, get fresh information on daily basis. If this vanish, I move on.

 

I do not stick with a certain earning form. I started with PTR (Paid To Read) programs, tried HYIPS, now I'm starting with my own forum but am staying within my original skills.

 

I diversify my advertising. Started on forums, tried banners, now I opened a blog, but will try to write something on Wikipedia...

[Follow The Trend 10]

Diversification is a useful tool for long term investors, as this basically aligns your investments to a particular market(s) movement.

 

There are many articles about diversification, although in summary you need to spread your investments between different "beta" stocks. Some stocks move in line with the market, some in the opposite direction.

 

There are calculations you can carry-put to see how well you are aligned to a certain market(s), but your portfolio will need constant adjustments.

 

One problem with diversification is the fact it is based on historical stock volatility data, and this data is changing constantly.

 

I think the subject of stock "betas" is a good subject for another Thread...............

[Soultrader 12]

I think the subject of stock "betas" is a good subject for another Thread...............

 

I agree... I am no intermarket analysis expert but I did study John Murphy's work quite a bit.