The Myth of Diversification

In one of our first lessons about finance we heard the word Diversification.
Wikepedia give us one interesting definition - Diversification in finance involves spreading investments around into many types of investments, including stocks, mutual funds, bonds, and cash. Money can also be diversified into different mutual fund investment strategies, including growth funds, balanced funds, index funds, small cap, large cap, and sector-specific funds. Geographic diversification involves a mixture of domestic and international investments.

Why we should use the Diversification? Diversification reduces the risk of the investments. For example, if we buy stocks of two different companies working in different industries, and occurs some problems in one of then (problems with the supply of one of the inputs), the money of the investors goes to the other companies belong to the other industry (stocks prices will rise). So, the money that you lose in one company will be the money that um win in the other, your risk is reduced. Of course this example is in a world of two industries with one company each other. In the real world you should have money in all companies in all industries.

But no risk, no return. This way you will never be rich. What you lose in one investment you win in the other. Diversification reduces risk, this way you can afford some money, but not a big amount of money. The secret is anticipating the rise of the stocks, using information. Information is everywhere, you only need to pick it up. You can obtain the same result of diversification (reduce the risk) with a better return, by studying the market. This kind of exercise you can make for everything, and turnout your life better. In the above example you would buy the stocks of the second company and realize a great profit.

Who Wants to Be Rich?

Money, money, money … this is a problem for many people. Have you ever asked yourself why don’t you have enough money? The answer is simply, you don’t use your head. The opportunities are in everywhere you only need to know discover then.

Impossible is nothing. Instead of saying: I don’t have money to buy it, try to find a way to solve your problem. We are in the information era, if you are quick enough you can make millions in a few days.

Another important thing is risk, rich people assume risk. They don’t have fear to lose money. You only need to be success 51% of the times. Of course you can high the probability of success by seeking information, but be careful, there is a trade off between information and time. If you take a long time, you can lose the opportunity.

In next posts I will write more about this subject, so that be attentive.

OUR GOAL

Hello,

Welcome to my new blog. The propose of this blog is giving advices to everyone. My aim is to conquer a new place in the internet, a place when you can read the best advices about anything. I will speak about cars, economics, finance, jobs, products and services. If you have a problem this is the place, the right place to come. Here you will find the reply to your problems.

Our mission is helping people to resolve all kind of problems by providing free information and advice about many products and services.

Be sure you don’t forget this blog: www.danieladvice.blogspot.com.
Before you make a decision go to our site, i am sure you will find the solution.

Best regards,
Daniel

PS: They don't ask me for advice.