How would you diversify $10,000, $25,000, $50,000,100,000, and 1,000,000?
Prior knowledge before you call me a noob. Ignorant people on the internet….
I am 17 turning 18
Place 47/1256 on a legitimate mock stock market game across the school from the East Coast.
I watch Mad Money Every Day
I get bored and I read sources on investopedia
I am playing 6 different simulators on investopedia.com
I am messing around “gambling” with Penny Stocks.
I read “24 essential lesson for investment success” by William J. O’Neil and I am now reading “How to Make Money in Stocks”
I am asking how to diversify these various quantitative numbers for later in life when I become a stock broker.
I would assume the following so the stocks are not liquefied….
10k- 2 stocks
25k- still 2 stocks
50k- 3-4 stocks
100k- 4-5 stocks
1000k- Tricky…I would diversify 15 solid stocks?
What are your opinions in the following format: 10k 25k 50k 100k and 1000k
You’re doing some good things to prepare as an investor, but also a few things that are not so good.
1) Stop wasting your time on penny stocks. It is silly to play a game where the deck is severely stacked against you.
2) Recognize that Cramer is entertainment, sound bites rather than investment advice. Check out Nightly Business Report on PBS.
3) Investment games are not real life. They do not accurately reflect liquidity, trading costs, or the market impact of your own trading. Most importantly, they do not include the experienced professionals that you compete against in cash markets.
Your question on diversification is important, but it is not as simple as that.
1) As much as I love stock investing, you should not invest solely in stocks. Asset allocation is incredibly important.
2) Taxes matter. You will not invest only in a single cash account. If you are smart, you will take advantage of employer 401k plans, IRA account, and their Roth versions. In 401k accounts, your investment choices are usually limited to what the plan offers.
3) Buying 2-5 stocks provides little diversification benefit. Under 50k, someone should seriously consider mutual funds rather than individual stocks.
4) You can buy 10-20 stocks with 100k. The question is whether you have the time and expertise to analyze stocks sufficiently to have a real competitive advantage. Remember that you will probably have to analyze 100 stocks to find 10 worthy of investment.
Suggested reading that should be available in most libraries:
One Up On Wall Street – Peter Lynch
A Random Walk Down Wall Street – Burton Malkiel
The Intelligent Investor – Benjamin Graham
Wall Street Secrets Penny Stock Secrets Mad Money