Learning about shares: Shares to spread the risk, increase the fun

Thursday 25 March 2004

Olympic champ BARBARA KENDALL gets help from NZX's Dan Dividend

By The Landlord

Q. Barbara asks: We briefly covered diversification in our discussion of risk last week. Can you tell me how many shares I need to have in an adequately diversified portfolio?

A. Dan Dividend responds: Good question. I'll start with a re-cap on diversification before I call on this week's guest NZX broker.

As we discussed last week, you can use diversification to reduce the risk of your investments.

In share investing, diversification means buying a range of shares across different industries. Share prices move independently - some might be up, others might be down. However, by spreading your investments, overall your money should be growing at a nice steady pace.

Including companies with different risk levels in your portfolio is another diversification tool. You could buy into a big, well established company that dominates its industry, and a young company that looks set to take on the world.

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