A mutual fund or index fund provides more diversification than an individual security. They track a bundle of stocks, bonds, or commodities.
Investing for Cash Flow – Building a More Diversified Investment Portfolio
Diversification has a number of benefits for you as an investor, but one of the largest is that it can actually improve your potential returns and stabilize your results. By owning multiple assets that perform differently, you reduce the overall risk of your portfolio, so that no single investment can hurt you.
It is a management strategy that blends different investments in a single portfolio. The idea behind diversification is that a variety of investments will yield a higher return. It also suggests that investors will face lower risk by investing in different vehicles.
Financial-industry experts also agree that over-diversification—buying more and more mutual funds, index funds, or exchange-traded funds—can amplify risk, stunt returns, and increase transaction costs and taxes.
A good investment portfolio generally includes a range of blue chip and potential growth stocks, as well as other investments like bonds, index funds and bank accounts.
By this calculation, to get $3,000 a month, you would need to invest around $108,000 in a revenue-generating online business. Here's how the math works: A business generating $3,000 a month is generating $36,000 a year ($3,000 x 12 months).
Here are some options to double your money:
7 Different Types of Income Streams
What is the KISS rule? Keep it simple, stupid. -means successful investments are ones that are simple. Avoid complicated investments that are difficult to understand or explain.
Over diversification is possible as some mutual funds have to own so many stocks (due to the large amount of cash they have) that it's difficult to outperform their benchmarks or indexes. Owning more stocks than necessary can take away the impact of large stock gains and limit your upside.
Typically, balanced portfolios are divided between stocks and bonds, either equally or tilted to 60% stocks and 40% bonds. Balanced portfolios may also maintain a small cash or money market component for liquidity purposes.
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