|
The biggest thing you should do when investing is diversify. Enron stock looked great till you found out what they were doing with the books. Conventional investing theory says you need a minimum of 20 to 30 stock spread over different industries to achieve a good balance that exposes you to less market risk than someone who holds only 5 stocks or so. That is why many people invest in mutual funds. A mutual fund is highly diversified. Unfortunately sometimes the fund managers make less money than they could have by trading stocks too frequently. I'm a big believer in investing for the long-term. Don't buy a stock hoping for a short-term gain. One way that Warren Buffett recommends to invest is to stick to index funds that mirrow things like the S&P 500. There are no choices for the fund managers to make. They are invested in the stocks that make up that particular index. It also helps to know that most mutual funds do not beat the S&P 500 return.
|