If you've made great returns on your stocks, you still need to diversify. Here are seven things to keep in mind.
Hello welcome to Arista Advice. Question of the week is: "Paul, I've made some great returns on my stock. Why should I diversify?" Let me give you seven suggestions in regards to diversification.
Number one - people are being drawn into the stock market by the media who are seeking high returns and fortunes by being made to invest in stocks, like AMC, game stocks, and a few others. Be careful and be cautious.
Number two - investing is not gambling. When you treat the stock market like a casino, you must choose the right stock at the right time, both in and out, and it can be dangerous to your financial health.
Number three - invest in the market as a whole, and let the compound effect take over.
Number four - when the market grows at a rate of 10%, the dollar doubles every seven years, called the rule of 72. Take any rate of return that you're getting divide it into 72, and that's how many years it will take to have your money double.
Number five - the S&P 500 has grown 10.26% since 1926. That's a staggering number by just staying put and keeping your emotions in control.
Number six - Fidelity has done a study, and they have found that individual investors that have done the best in their account are investors that have lost their account number and their password and weren't checking in on a regular consistent basis but allowing high quality investments to do their job.
Number seven - diversify, diversify, diversify, and have the discipline to stick with it. Investing is never easy, but if you stick with it and you stay investing is never easy, but if you stick with it and you stay structured and disciplined, the reward is amazing.
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