011 WealthFast Podcast – Why Diversification Rocks!

WealthFast Podcast show

Summary: Here's an interesting investing paradox: You must be well-informed about your investments while simultaneously staying diversified. You see, here's the problem. To be a savvy investor, you have to understand the industry/company you're sinking money into. Investing without knowledge, research and due diligence is gambling. But your brain can only handle so much. You can't be an expert in everything. At the same time, you shouldn't put all your eggs in one basket. (Trust me, I've tried. You'll hear the story in this week's episode.) So how can you balance the need to diversify with the obligation to stay informed? Here are a few suggestions for stock investing: Buy many stocks within the same industry, - or - Buy one or two stocks per industry, across multiple industries Limit the total number of individual stocks that you own Here are a few suggestions for real estate investing: Stick to only managing rentals, or only flipping houses, or only selling lease-purchases ... in other words, stick to one core business strategy, but diversify across neighborhoods and geographic zones or across rental classes - or - Stick to one geographic area, but diversify by doing flip/rental combos. This isn't a comprehensive list of how to diversify. These are just a few suggestions. For more details, listen to the podcast! Resources In this week's podcast, we discuss a guest post on Paula's website, Afford Anything, called “How I Started Flipping Houses.” It was written by a man who started out holding rental properties, and then diversified into flipping houses. He produced one great flip ... and one flop. Read his story at that link! Got questions? Call our hotline at 770-744-0527. We'll answer your question in an upcoming episode.