Diversification of your Portfolio
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Transcript Diversification of your Portfolio
Diversification of your
Portfolio
Stock Lesson
Learning Target
I can explain why is it important to
diversify your stock portfolio.
Why Diversify?
Less risk of losing money when markets
go down.
Greater return on investment over time.
Greater average rate of return over time.
Industry Terminology
Cyclical Stocks- Stocks whose
performance tend to mirror the economy.
Example- Real Estate Company’s
Economy
is up = Housing Market up
Economy is down = Housing Market Down
Industry Terminology Cont’d
Industry
Net Income:
What remains after subtracting a company’s costs from its revenue.
Profit is a company’s reward for taking a risk and successfully
producing what people want to buy at prices they are willing to pay.
Revenue:
Total earnings after all expenses and taxes have been paid.
Profit:
: A group of companies producing similar products or services.
Revenue is the money collected for providing a product or service.
Sector:
A group of stocks, often in one industry.
The performance of any single stock in a sector can be measured
against the performance of the group. Pharmaceutical companies, for
example, are part of the health care sector.
Lets look at an industry…
Retail
JC Penny
Dillard's
If you were deciding to buy stock in this
industry where could you research these
company’s?
What would you look for?
How would you decide which one to
invest in?
Cash Balance with SMG
Maintain a cash balance no greater than
25,000
You earn a generous 5% on your cash
balance
Do not use all or more than all of your
cash balance
You pay 7% interest per day to borrow
money if you are negative.
Do not have more than 30% of your
portfolio invested in one stock.
Stock Group Activity
Create a list using Excel of companies in several different
industries that you would consider investing.
Compare each of these stocks with a similar company in
the same industry.
How is that company doing compared to yours? Better or
worse? Justify your answer in a Word Document, and
provide reasons as to why you would invest in each of
these stocks.
How diversified is your portfolio? Explain using examples.