You should diversify in different assets classes. Diversify but don’t over diversify in same asset class, which usually cancels out all potential gains. A good example is owning a stock like Apple, but then owning the NASDAQ 100 index. Apple makes up a large part of that index fund, so you're not really diversified (plus, the NASDAQ is mostly tech, like Apple).
Invest in different assets classes such as stocks, bonds, mutual funds, bank deposits, gold, forex, real estate and other instruments. And, even within an asset class, say stocks, go for good quality companies.
Philip Fisher says “I don't want a lot of good investments; I want a few outstanding ones.”
For more information, check out the following:
- 4 Mistakes That Cost Investors Millions
- How To Maintain Proper Asset Allocation With Multiple Accounts
- Asset Allocation Basics
Make sure that you check out the rest of our Daily Investing Tips series.