@ptilda wrote:
Everything I read says it's important to diversify, but then warns (often) about over-diversification.
I'm pretty new at this game. I'd appreciate hearing the experience and options of others... as well as reasons, for investing in various ways.
Thanks!
When people say it's important to diversify, they are referring to the type of stocks/funds you own. By type, I mean different industries, different segments, different services, etc. The goal being to invest in various companies that willl behave differently in different types of markets, but over the long term, they will all (hopefully) beat the indexes (which is what people mean by beating the market).
Over-diversification is what happens when you buy so many different stocks with so many different behaviors that you match the indexes while spending much more time and money.
As far as my own portfolio, I am currently putting all my investment money into index funds. I do have some actively managed funds that I invested in when I first started out. For tax reasons, the money will stay there for a year, after which it will also be put into an index fund.
I'm also trying my hand at individual stocks, though it's only one and it's a very small piece of my portfolio.
As you are new to investing, I *highly* recommend the following books: Charles Schwab's New Guide to Financial Independence, The Intelligent Investor.
The first book explains what investing is and the various places to put your money (including non-investments like savings accounts). The second book was written by Benjamin Graham. He was Warren Buffett's mentor and created the investing style he follows today.
