Much like someone who is conservative politically, a conservative investor does not take much risk, and aims to limit the change in their portfolio. People who use this investment strategy pick super-safe securities like McDonald’s or Coke stock. They’re not looking to get rich quick; they just want to preserve the money they do have and grow it a bit along the way.
You see this type of strategy in a lot of retirement plans, as the last thing people want is for their retirement savings to disappear because they took too much risk.
Since we Americans like staring at screens and scarfing cheeseburgers, the most conservative stocks are ones like Apple, McDonald’s, and Coke.
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Finance: What is fund diversification, a...37 Views
finance a la shmoop. what is fund diversification and why is it important?
well ever hear the phrase don't put all your eggs in one basket ? yeah if you do
and there's a pothole, well, this can happen. had she put a few eggs here [woman drives car]
than another few there and then another few there well breakfast might have been
saved. well the same thing works for stocks. sorta ,put all your eggs and
shares of the newly IPO to whatever dot-com and it could be a moonshot. [chart on screen]
SpaceX IPOs at fifty bucks a share and soars to a thousand dollars a share, but
well then the Martians kill the visitors and eat their brains and the spacecraft.
oh well you were rich for at least an hour. that's something right most people [alien on flaming planet]
don't want to live such a volatile life, especially when it comes to thinking
about long-term investing and maybe even retirement. when your entire investment
portfolio is in one stock it can be a wild ride and if you're not a
professional investor it's likely that you'll get weak and sell at just the [woman types at computer]
wrong time .so instead of having to worry about timing and picking just the right
stock most investors buy a basket of stocks which are diverse. like two-thirds
US stocks one-third non-us stocks. maybe twenty percent of your portfolio is
invested in high-growth technology. ten percent is in transportation with a lot [pie chart shown]
of dividend yield. and of course there's always the one percent riboflavin. I
don't forget that. so yeah when you diversify and two or three of your
stocks take a dive, well then not all of your eggs are ruined. there are just one
or two rotten ones in the bunch while the rest are going to be used to cook [smiling man eats eggs]
one heck of an omelette.
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