Millennial Stock Market Tip #1: Diversification Is For Chumps!
Just about all stock market tips lists will tell you to diversify when investing. Here’s the truth….
Diversification is for chumps!!!
Joshua Rodriguez – the guy writing this article!
Diversification is used to protect assets when a stock that you invest in takes a dive. Ultimately, the stocks not falling act as a hedge against the ones that are. Sounds good, right?
Not really!
There’s a very big problem with diversification. If you have your money spread over several stocks across several sectors, you don’t have enough time to really get to know any single investment!
If you don’t have the time to properly analyze market conditions and the company that you’re investing in, you’re pretty much playing darts. You may hit a bullseye once in a while. Sometimes, the dart is going to miss the board entirely!
Instead of diversifying, choose two or three companies in a single sector. This will allow you the time to follow every piece of news issued by each of these companies. It will also allow you the time to pay attention to overall market conditions.
By focusing your investments on fewer, more high quality opportunities, the chance that one of the stocks you invest in will dive slims down quite a bit.
I know, you’re probably thinking, “There’s a reason that everyone says to diversify!” Sure there is, just ask Warren Buffett:
Diversification is protection against ignorance. It makes little sense if you know what you are doing!
Warren Buffet via Investopedia
So, if you want to go with the diversification note in the stock market tips lists online, be my guest, but
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