What Is Diversification?

When investing in stocks, it is wise that you diversify your holdings.

Diversification is when you own multiple stocks in different industries. The purpose of diversifying is to minimize your risk by not putting all of your eggs in one basket.

For example, we at Wealthy Joe recommend that you own a minimum of 15 stocks. An ideal portfolio of 15 diversified stocks would look like this:

1. Five Technology Stocks

2. Five Healthcare Stocks

3. Five Financial Stocks

Can you maximize your return if you diversify? Absolutely.

We don’t invest in hindsight. We invest not knowing how the future will turn out.

Could you have made a ton of money by investing all of it in Apple? Sure. But you’d have been taking a risk that Apple alone was going to carry you.  Quite frankly, anyone who did that got lucky!

If you’re a new investor, get to 15 stocks as quickly as possible, and diversify along the way.

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)