Should I diversify my stocks portfolio if I have only 5000 USD?

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  • Should I diversify my stocks portfolio if I have only 5000 USD?


Answer #1 | 22/12 2013 06:33
How old are you? Subtract that number from 120. Invest the number you get (as a percentage) in a high-quality, low expense ratio, Growth Stock Mutual Fund, and the balance (if there is any) in a high quality, low expense Bond Mutual Fund... With only $5,000, if you try any other approach, the fees & commissions will eat you alive and you will end up with LESS money than you start with... If you "sell, buy, sell buy, as much as needed," you will almost undoubtedly lose your entire $5,000 within a few short years... If instead you buy $5,000 worth of shares in a Dow-tracking Mutual Fund, ten years from now you will have between $10,795 and $15,529....if you leave it alone, in twenty years you'll have between $23,305 & $48,231... (All figures are adjusted for inflation and expressed in "today's dollars"...)
Answer #2 | 22/12 2013 10:25
I would not invest in 10 stocks with that little money. The commission to buy and sell all of them would be $200 alone. find two solid undervalued stocks and put 2500 in each
Answer #3 | 22/12 2013 10:52
Diversification is a good way to protect yourself which means buying multiple stocks. As others stated because of trade fees if you buy 10 stocks you will most likely lose 3 at least of your return if trading fees. In the long run this may be tolerable but for turn trading the fees will eat away a lot of your profit. If you want to invest in multiple funds you may want to consider a mutual fund or etf although the returns will not be as good as a top performing stock, you do not risk loosing your money if just one of the stocks goes south. The problem most novice investors face is that they mainly look at past performance to determine what stocks they will buy. The problem with this is that stocks have trends so often the best performing stocks during one period will be subjected to some of the biggest loses during the next period. Most new investors will try and ride this until they lose most of their money and then they sell when the stock is close it its low. Basically if you buy a stock that went up 70% last year do not be surprised if it goes down 50% the following year. Stuff like this happens all of the time with the high return stocks because they will often become way over priced.
Answer #4 | 22/12 2013 11:57
yes it is only 5000 USD

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