Portfolio tactics

Wow, this'll be a big one!  But since it's so general, we'll probably be changing this over time, and adding more and more stuff.

What the @#$% is a portfolio?

A portfolio is the fancy investor term meaning your collection of investments.  Thus, portfolio tactics are basically tactics to use for general investing; essentially these are rules you might do well to follow when you're buying shares.

Diversification

     Diversification:  (diˈvərsiˌfiˈkā sh ən)  noun.  The act of diversifying a portfolio.  

     Diversify:  (diˈvərsiˌfī) verb.  To purchase a wide range of stocks from different industries and

businesses.

The purpose of diversification is to prevent major losses from plaguing your investments in case of an industry crash.  And trust me, you will definitely lose some money in the stock market.  DEFINITELY.

The good news is that, unless the market is plunging into a recession, significant changes only occur in industries, such as Energy, Healthcare, and Technology.  For example, an oil shortage would mainly only affect the energy sector, since it has less goods to distribute.  Yet that hardly makes any change to the production of Apple's iSoul, but for transportation costs (indirect factors).

If you had been exclusively invested in Energy when the shortage hit, your entire portfolio would have taken a hit.  But if you average in your Conglomerates and Financial sector investments that didn't take a hit, you wouldn't suffer nearly as much!

That said, the same goes for a ridiculous growth in a single company out of the tens that you invest in;  companies with normal growth would bring down profit from your super-company.  Basically what diversification does for your portfolio is to reduce risk of failure.  It can also reduce profit, but that's your choice to make.

NEWS NEWS NEWS

Simply liking a company in general is definitely NOT a good way to invest.  If you're thinking long term, that kind of thinking helps, but you absolutely must pay attention to current events, or else your company will tank (lower in value) before you know it.  Take advantage of major events (like oil spills, maybe?  BP lost a whopping 50% in the two months after the spill!!), and the especially helpful quarterly reports, when companies tell you how much they actually sold and lost in the past three months.

More to come!