INVESTMENT PRINCIPAL #1 PORTFOLIO DIVERSIFICATION.

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Presentation transcript:

INVESTMENT PRINCIPAL #1 PORTFOLIO DIVERSIFICATION

WHAT IS A PORTFOLIO? YOUR PORTFOLIO StocksBonds Mutual Funds Money Markets Savings Accounts The collection of investments you personally hold. Ownership in a company A special type of loan Single investment mixing stocks/bonds Highly-liquid investments Used for saving

WHAT IS DIVERSIFICATION? Diversification is owning a collection of investments in order to spread risk and have a safer investment overall.

WHAT IS DIVERSIFICATION? Diversification is owning a collection of investments in order to spread risk and have a safer investment overall.

TYPES OF MARKETS Bear Market = slow market Bonds and money markets do well. Bull Market = growing market Stocks do well.

HOW DO I DIVERSIFY? 1.Know your own style How much do you know about investing? Do you like to take risks? 2.Research What investment options are available to you? 3.Figure out your time horizon How long do you have to invest before you need your money? 4.Practice Use Wall Street Survivor and the Virtual Business Sims before it’s your own hard-earned money on the line!

STEP 1 – KNOW YOUR STYLE How much do you know about investing? Beginner, Intermediate or Advanced? Do you like to take risks? Take the investment risk tolerance quiz.

STEP 2 - RESEARCH Large Cap $5 billion or more Mid Cap $1 billion to $5 billion Small Cap Small Cap $1 billion or less Less Risk More Risk

STEP 3 – TIME HORIZON Long Horizon 10+ years Intermediate Horizon 1-9 years Short Horizon <1 year Less RiskMore Risk Money MarketsBondsStocks

STEP 4 - PRACTICE 1.Simulation Lesson 15 – Diversification 2.Portfolio Check 1 a.List your risk tolerance b.At least 95% invested in stocks c.At least 7 sectors d.No more than 30% in any one sector e.Proper mixture of large capitalization and small capitalization stocks for your risk tolerance

PORTFOLIO CHECK 1 InvestmentSymbolSector Total $ Invested Capitalization At least 7 sectors No more than 30% of portfolio Must match your risk tolerance. $1,000 to $5000 in Cash

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