Question

Find information about Power of Diversification. Next, build a personal portfolio of 7-10 firms either equally invested or investment spread unevenly. List the firms you have chosen and the reason for your choices and how diversification played a role in your choices. You can use Youtube to fine videos on the topic or goggle. it has to be 250 WORDS PLEASE!!!!!!!

Answer 1

Diversification- It is the risk mitigating strategy. Diversification is to invest your money into different investment sources and different sectors so as to diversify the risk. This concept says, "Do not put all your eggs in one basket." Diversification gives us advantage of growing sectors and also save us from down turn. It keeps your portfolio balanced even in the down stock market. Diversification gives benefit in long run.

How to take advantage of diversification- Investors can directly invest into stock market, they can choose some blue chip companies of different sectors and segregate their money accordingly else they can go for Mutual fund. Mutual fund companies invest your money into different sectors and fund. Mutual funds are professionally managed by Fund managers and also provide tax benefit.

Building a personal portfolio: If I have $1 lac to invest, I will not put my money into one sector or company rather I will choose few good companies of different sectors. I will choose these sectors-

1. IT & Technology
2. Healthcare
3. Fast moving consumer goods (FMCG)
4. Financial services

I will choose these following companies:

1. Apple Inc.
2. Microsoft
3. Johnson & Johnson
4. Facebook Inc.
5. Walmart
6. Wells Fargo
7. United Health Group

I choose these companies as they belong to different sectors and all the companies are fundamentally good.