The Importance of Diversification

Imagine this : If you invest only in 2 stocks and one of your stocks crashes suddenly, or worst still got suspended indefinitely for whatever reason, causing a potential total loss, it would affect your entire portfolio significantly. One more bad mistake and you could be wiped out completely!When it comes to investing, the two most important things for me are capital preservation and being right more than wrong so that I have a “net” gain overtime. Usually I would spread my investment over 10 stocks. One bad mistake with total loss and I am only down 10% of my entire portfolio. That would be ok for me and I can continue trading without much damage, financially and psychologically.

So the next time you invest, you may want to consider spreading your eggs!