What Every Portfolio Should Have?

One of the first and most basic rules about investing is to diversify and not to put all your eggs in one basket.

No matter how good a company is, never ever put more than 20% of your money in that one stock. History has showed that no matter how strong a company has been or how long it has been around, anything can happen.

No one would have ever thought that Lehman brothers, Bear Stearns, AIG, Enron or WorldCom could have suffered the fates they did. They were once the largest and strongest companies in the world.

At the same time, never put all your money into one sector/industry or even one country. For example, if you had put all your money in US financial stocks only, you might probably be trying to hang yourself right now.

If you had put some of your money into oil stocks, commodity stocks and defensive stocks (i.e. McDonald's, PepsiCo), the profits you would have made on these other companies would have reduced or offset the losses on your financial stocks.

I also suggest that you include inflationary driven stocks and defensive stocks. Whether we like it or not, inflation will always cause prices of good and services to go higher in the future.

At the same time, as world oil reserves deplete and demand for oil will only increase over time, it means its prices will definitely keep going up.

So instead of bitching and complaining, why don't we take advantage of this fact? Buy stocks that will benefit from inflation and higher oil prices!

It is also always good to include defensive stocks into your portfolio. Defensive stocks are stocks that people buy up during recession and downturns and hence their prices tend hold steady or move up while the overall market is bearish.



Author Description :
- About the Author:

Adam Khoo is an entrepreneur, master investor, best-selling author and a self-made millionaire by the age of 26. Over the last 15 years, he has trained over 350,000 professionals, executives and business owners tap their personal power and achieve excellence in their various fields of endeavor. Visit his blog at http://www.Adam-Khoo.com or download your FREE chapter of his latest book "Profit From The Panic" at http://www.ProfitFromThePanic.com.