Christchurch and San Francisco are places known for earthquakes. But if you take a look at the city, there isn’t just one form of protection. Houses are made from timber instead of brick, bridges are designed to sway instead of crumble, and skyscrapers use springs to absorb seismic energy. The simple rule of thumb: a city that diversifies their earthquake solutions will lower the overall risk of damage.
A strategic investor will do the same with the stock market. Diversifying happens when an investor purchases shares from different industries and funds. It’s super important because if a metaphorical earthquake strikes one company, you’ll have the strength of your other stock to lower the overall damage.
Tips and tricks
Don’t put all your eggs in one basket. It’s better to diversify and spread out risk.