Asset Mix

finance a la shmoop. what is fund diversification and why is it important?

well ever hear the phrase don't put all your eggs in one basket ? yeah if you do

and there's a pothole, well, this can happen. had she put a few eggs here [woman drives car]

than another few there and then another few there well breakfast might have been

saved. well the same thing works for stocks. sorta ,put all your eggs and

shares of the newly IPO to whatever dot-com and it could be a moonshot. [chart on screen]

SpaceX IPOs at fifty bucks a share and soars to a thousand dollars a share, but

well then the Martians kill the visitors and eat their brains and the spacecraft.

oh well you were rich for at least an hour. that's something right most people [alien on flaming planet]

don't want to live such a volatile life, especially when it comes to thinking

about long-term investing and maybe even retirement. when your entire investment

portfolio is in one stock it can be a wild ride and if you're not a

professional investor it's likely that you'll get weak and sell at just the [woman types at computer]

wrong time .so instead of having to worry about timing and picking just the right

stock most investors buy a basket of stocks which are diverse. like two-thirds

US stocks one-third non-us stocks. maybe twenty percent of your portfolio is

invested in high-growth technology. ten percent is in transportation with a lot [pie chart shown]

of dividend yield. and of course there's always the one percent riboflavin. I

don't forget that. so yeah when you diversify and two or three of your

stocks take a dive, well then not all of your eggs are ruined. there are just one

or two rotten ones in the bunch while the rest are going to be used to cook [smiling man eats eggs]

one heck of an omelette.