Diversify: Key to successful investing

With every business comes risks, and even greater if you put your money in stocks or mutual fund, this is because these investments are volatile. Stock prices increases and decreases every minute or so, so predicting its trends may not be that easy, unless you have a superpower prediction software installed in your brain.

So why is investing in stocks very risk? For people like me who have not gone to Business schools stock is a term not usually discussed and most are not that acquainted with this term. So what is a stock? According to www.investorwords.com, it is an instrument that signifies an ownership position (called equity) in a corporation, and represents a claim on its proportional share in the corporation's assets and profits. Therefore, when you buy a stock offered by a certain corporation you become a part-owner of that company. And if they obtain profit, you also get profit but the downside is that if they lose, so will you. And predictability of when profits are good and losses are bad are never determined easily.

How do we keep our money from catastrophe? We need to have many investment baskets in order to do this. It is a good decision to divide your money and invest it to many kinds of stocks, or investment baskets. For example, you invest a quarter of your money to agriculture stock, a quarter to mutual fund, a quarter to government bonds, while the last quarter to mining…the list is endless; it is up to you to decide. You can even follow the cost averaging technique to widen your grasp to more investment profits.

Why diversifying your investment a way to success?
• Manage your risk better. In this way, if one investment is losing, it could be compensated with a profit-earning investment.
• Increase profit. It is not always that your stocks are giving you benefits, most often, investments losses, stock prices are going down therefore, if you have invested in only 1 “basket” you may definitely loss that hard-earned money.

Furthermore, diversifying is the key in winning this investment battle. If you will only put all your money in one asset there is a greater risk that you will either win or lose. A two-faced coin will only give you the head or the tail. But if you have many interests in many investments, you are able to manage your portfolio well and may in turn get more profits.

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The Importance of Cost-Averaging Scheme when into Mutual Fund

The cost-averaging strategy is very applicable in succeeding when you are investing in mutual funds or when you are into common stocks. By employing this approach, an investor can greatly increase his chances of earning higher net over a period of at least 5 years and also reducing his risks of losing.

How does it work?

Before we proceed, let us first discuss what a cost averaging technique is all about. Firstly, it is designed to reduce market risk through careful planning and buying of securities and investments at a predetermined interval and with a predetermined set of amount. Many investors are practically applying this, and most, if not all, have attested that cost averaging is a technique that delivered them better profits.

Instead of investing or buying stocks in a lump sum, an investor buys securities at smaller prices slowly and in regular intervals, says every month.

Let me put it this way, you have 10, 000 USD and you have been eyeing on an investment worth 2USD per share. Instead of using up all of your 10, 000 to buy the stock, what you are going to do, in following cost averaging technique, is to buy 1000 USD in the first month, then another 1000 on the second month, and so on until you exhaust all your 10, 000. This spreads the cost basis out over several months, providing insulation against changes in market price.

If you are going to calculate, you will fare better than buying the whole thing one time.

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