How To Invest As Millennial Part 2

Cash In Hand by James Barker & freedigitalphotos.net

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I AM IN NO WAY A MARKET PROFESSIONAL; USE YOUR OWN JUDGEMENT WHEN PURCHASING STOCKS AND OTHERWISE. I AM NOT RESPONSIBLE FOR AND GAINS OR LOSSES THAT YOU MAY EXPERIENCE.

THE MARKET IS INHERENTLY RISKY, AND YOU SHOULD ONLY INVEST WHAT YOU ARE COMPLETELY WILLING TO LOSE.

This is series of  blog posts about finance build on each other  go to part 1 

http://coolermassmedia.com/how-to-invest-as-millennial-part-1/

Diversification 

What does diversification mean? from wikipedia
In finance, diversification is the process of allocating capital (Note from Dorian Capital also means Money or Cash) in a way that reduces the exposure to any one particular asset or risk. A common path towards diversification is to reduce risk or volatility by investing in a variety of assets.

For example. Person A has $1000 in Microsoft also called MSFT in the U.S. stock market and Person B have $500 in Microsoft & $500 in Apple. Now using Person A & Person B lets say that Microsoft stock went up by 30%

Person A net worth is now $1300 & Person B net worth is now $1150. You maybe want to be Person A but this example is on the positive side. Now for the same example except lets say that Microsoft stock went down by 30%

Person A net worth is $700 & Person B net worth is now $850 by having 2 different stocks Person B help protect his net worth. (Note, if the Microsoft stock went down by 30% Apple stock would mostly like go down too by some % because they are both Technology stocks even though Apple is listed in the Consumer Goods when one big stock in the same sector gone down they all have a chance to do the same.)

Diversification &  Sectors

What is a Sector? from investopedia

A sector is an area of the economy in which businesses share the same or a related product or service. It can also be thought of as an industry or market that shares common operating characteristics. Dividing an economy into different pieces allows for more in-depth analysis of the economy as a whole.

Here are some common sectors of stocks (note on some apps call them something else as Materials not Basic Materials or Energy not Oil & Gas which is a better name for it.

Healthcare

Technology

Consumer Goods

Services

Utilities

Basic Materials

Financials

Oil & Gas

In my next post will be more on what the 8 basic sectors do & what to look for

 

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