September 23, 2016

Don't know what stock to buy? Simply diversify! I’m buying Arkema

Today, there were several interesting stocks on the Top 10 List of the French SBF 120 Index. That’s why I had some difficulty selecting just one stock.

Over-analysis leads to indecision and prolongs the investment process. This is a problem. Investors who invest regularly have higher returns than the procrastinators. The reason is simple: They keep buying stocks even when prices are rock bottom.

What should you do? One possible answer comes from diversification, which is the principle that you should not put all your eggs in one basket, but instead work towards eventually owning twenty to thirty stocks. The reason is that diversified portfolios are safer than concentrated ones.

That’s why I analyzed my own portfolio with the Obermatt spreadsheet on Google Sheets (free here). This is how I discovered that I only own one stock in the chemical industry. For that reason, I bought Arkema, a French Chemical Giant with a whole line of interesting products.

The principle of diversification made my decision easier and safer, without having to think much.

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