I Hate Losing Money! Where Do I Go?

After hearing so many people asking "If invest into the market no matter what I am bound to lose money." The truth is you are bound to lose money if you invest into the wrong stocks, its kind of the example if you buy an unsafe car; you are bound to crash because the brakes might fail on you. There are so many options of stocks, mutual funds, ETFS, but the main idea is to diversify your portfolio. What is diversification? Diversification is spreading your funds into many options instead of just putting all of your money in one stock. The market is always going on a up and down in all parts of the economy so if one sector goes up and there is a sector that always goes down. Here is a graph to illustrate how diversification leads to reduction of failure or losing your money.

The first part of the graph shows that if money is invested in the blue part of stocks 1-5, you are open to the most risk because your portfolio does not have enough diversification to reduce the risk. As you invest from stocks 6 and beyond, you will have lower and lower risk, also the chances of you losing all your money will decrease because you are diversified.

That is why you pay an annual fee when you invest in an exchange traded fund or a mutual fund because they automatically diversify for you. Most ETFS invest in about 30 stocks and mutual funds can invest from 50 to 100 stocks or even 500 different stocks. You wont have any significant positions, but you will be well diversified with your portfolio. This is the easiest way to invest and the least risky, but if you want to control your destiny then you can construct a portfolio of your own.

Good luck and leave comments!