What is Diversification? Part 1

We have talked about stocks, bonds, and cash. These are the tools you have to build wealth and diversify with if you choose. You can diversify in many different ways. A good investor makes sure to manage risk and always stay on top of their portfolio. You don’t have to put all of your eggs in one basket. You can diversify.

We are going to talk about a few of the different ways you can choose as an investor to diversify. First, you can purchase stocks. You can purchase stocks that are domestic or international. Domestic stocks are companies that mainly do business in the country you live in, in my case, the United States. International stocks are self explanatory. These are companies that do business all over the world, including the country you live in. Last is foreign stocks. These are stocks that are only traded outside of your country. For example, Japan would be outside of my country if I so choose to trade on their stock exchange.

You can choose based on the companies size. There are large cap companies that have a market cap of great than $5 billion. There are mid cap that are companies with a cap between $1 and $5 billion. Finally, there are small cap stocks that have a cap of less than $1 billion. There have been other categories that analysts such as mega cap, which include companies that are over $10 billion and micro cap, for very small companies.

The last one we will talk about in this article is the different Industry sectors that you can invest in. Some of these include financial, technology, health care, energy, retail, and consumer goods. Most people like to invest in a little of all the above. It helps them sleep better at night knowing they have picked the best companies in different businesses.

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