Investing Tips ? Why You Should Avoid Becoming Attached to Certain ...

A lot of people are investing in the stock market at the moment as the global economies continue to slowly recover. Nevertheless it?s still not easy to make consistent profits, and this is particularly true if you only invest in a small number of companies.

The best investment strategy is generally to invest in a large number of companies across many different sectors. this will help to spread your risk so you won?t necessarily lose a lot of money if a few companies in your portfolio issue poor results, or if a certain sector starts under-performing the wider market.

However, some investors still insist on throwing their money at one or two companies in particular. They will have done their research and found a few companies that they think are destined for great things in the coming years.

Unfortunately this usually means that they start to become emotionally attached to these companies and so their determination to hold on to them intensifies. this will often cloud their judgment and very often leads to disaster because so many young start-up companies simply do not end up fulfilling their potential. Furthermore many of these companies end up going bust.

The fact is that you need to spread your money around because otherwise you could quite easily lose half your money if you only invest in two companies, for instance, and one of them happens to go under. yes you can potentially make a lot of money if you pile into one or two stocks, but this is a very high risk strategy.

I always think you?re much better off investing in a large number of companies because that way you can still invest a small percentage of your capital into some more riskier investments. If they prove to be good investments your gains will undoubtedly be smaller, but if they don?t come off (which is certainly not uncommon), the value of your overall portfolio will fall slightly but it won?t be disastrous.

So the point I really want to make is that you should avoid making the mistake that so many amateur investors make, which is investing all your money into one or two companies. It doesn?t matter how much research you have done, or how convinced you are that your chosen companies are going to come good, there are no guarantees at all when it comes to stock market investing. You could quite easily lose some, or all of your money if you?re not careful.

Source: http://www.dailyrosetta.com/investing-tips-why-you-should-avoid-becoming-attached-to-certain-companies/32986.html

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