Why your share portfolio should be diversified
by Wealth Know How in Stock Market
In this video we look at why your share portfolio should be diversified as a fundamental way of helping to manage your investment risk. It's impossible to guarantee your wealth creation future but in this video James Dunn looks at why Diversification sometimes gets called the "one free lunch in investing". It's all about creating a better balanced result for your portfolio.
- sponsor - Wealth Know How
Wealth Know How is the online network helping people manage their wealth through financial education. Whether you are looking for simple ways to better manage your cash, or you are after a complete strategy on how to save for retirement, we can help you understand your options. It is important to have a vision for your future, but its knowledge not dreams that will ultimately deliver financial success.
Published on 17 Jan 14
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In this video we look at why your share portfolio should be diversified as a fundamental way of helping to manage your investment risk. It's impossible to guarantee your wealth creation future but in this video James Dunn looks at why Diversification sometimes gets called the "one free lunch in investing". It's all about creating a better balanced result for your portfolio.
Sponsor - Wealth Know How
Wealth Know How is the online network helping people manage their wealth through financial education. Whether you are looking for simple ways to better manage your cash, or you are after a complete strategy on how to save for retirement, we can help you understand your options. It is important to have a vision for your future, but its knowledge not dreams that will ultimately deliver financial success.
-
Venezuela tension heats up
Duration 03:16
-
Aussie dollar surprises market
Duration 03:10
-
Markets climb as investors watch US healthcare bill
Duration 02:31
Diversification sometimes gets called the “one free lunch in investing”—overall, and in the long run, studies show it gives you a better return for running the same level of risk; or vice versa, lowering the risk to achieve the same return.
Diversification doesn’t guarantee that you won’t incur a loss if the whole market is down generally, but it may smooth your medium to long term ride versus more concentrated portfolios and help lessen the impact of specific stock blow-ups.
It’s difficult even for highly-skilled professionals to consistently predict market cycles and wider economic conditions, which can at times, and for extended periods, dictate when and by how much a given stock will rise (or fall)
It’s even harder to predict failed crops or drilling wells, or drug tests, new regulations, poor management execution or other risks specific to a company, which may send particular stocks or groups of stocks plummeting!
However, it is possible to identify and combine stocks that tend to behave quite differently in alternative market conditions and economic scenarios, and so create a better-balanced medium term result for your portfolio