Stock Preacher

Penny Stock Diversification Strategy

Diversification is a strategy for reducing risk by spreading your money across different investments. It’s a fancy way of saying “Don’t put all your eggs in one basket” But how do you go about divvying up your money and distributing it among different investments? The easiest way to understand proper diversification may be to look at what you should not do:

Don’t put all your money in just one PENNY STOCK. Sure, if you choose wisely and select a hot stock, you may make a bundle, but the odds are tremendously against you. Unless you’re Stockpreacher (real expert) on a particular company, it’s a good idea to have small portions of your money in several different stocks. As a general rule , the money you tie up in a single stock should be money you can do without.

Don’t put all your money in just one Industry. I know people who own several stocks, but the stocks are all the same industry. Again, if you are Stockpreacher (an expert) in that particular industry, it could work out. But just understand that you are not properly diversified. If a problem hits an entire industry, you may get hurt.

Don’t put all your money in just one type of investment. SMALL CAP STOCK may be a great investment, but you need to have money elsewhere. Bonds, bank accounts, treasury securities, real estate, and precious metals are perennial alternative to complement your Penny Stock Portfolio. Some of these alternative can be found in mutual funds or exchange trade funds (ETFs).

Okay, now that you know what you should not do. What should you do? Until you become more successful in Penny Stock.

Only keep 20 percent of your investment money in a single small-cap stock.

Invest in four or five different Penny Stocks that are in different industries.

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