Don’t Be Crazy: Diversify Your Portfolio
Nov 21st, 2008 by Carlos
We all know the upside of diversification, right? You don’t put all your eggs in one basket, you spread yourself across various industries and companies, yada yada yada. That’s great and all, but did you know that you can also keep yourself sane by diversifying? My patented “Diversification Sanity” system can help you keep the crazy away while you invest responsibly!
All it takes is a little perspective—it’s easy. We all know buying stocks causes certain emotions in people, so what you need to do is buy a stock that balances those emotions out. For example, say you own stock of Wal-Mart, which has done quite well this year. It’s the OTHER stock that’s gone up. If you own Wal-Mart, you’re probably an optimist. You probably think that the economy is going to get better tomorrow and no one will be shopping at Wal-Mart anymore (“ewww…Wal-Mart??!!”) because things will be so good they’ll be buying diamond rings at Jared’s.
Now, if you own a stock like Coach, things are different. You’re probably a pessimist and you think things are about to crumble (um…crumble more?), the economy will get worse, and pretty soon we’ll all be shooting people in the back to steal their toilet paper. Luxury goods will not only lay on the shelves, they will be a symbol of all things evil and bourgeois. People will be selling their soul to the devil on E-Bay and shopping at—you guessed it: Wal-Mart.
Why is this? Because all investors are fatalists: we all think the worst possible thing is going to happen to our stocks. That’s investing for you. But by diversifying at least you can play both sides of your mental instability and protect yourself at the same time.
And for those of you that haven’t started investing yet…aren’t you excited to come into the fold?
