Diversify Your Portfolio: Stock Buying Tips


A diverse retirement portfolio is fast becoming essential and including stocks in such a portfolio is almost a must. While stocks are high risk options in general perception they have a proven record of yielding higher dividends and have held many in good stead as compared to other options such as mutual bonds. If you have just begun with making your retirement plans or are trying to diversify your portfolio there are some important things to be borne in mind while purchasing your own stocks.

  • Get A Professional Opinion: It is usual practice to involve a stock broker when purchasing stocks. Brokers charge differently based on their responsibility and the level of their involvement. They are licensed to purchase stocks for their clients for a pre-fixed commission. A little research should also go in selecting the right broker. There are different brokers with different portfolios,
  1. Money Managers: Money managers do just that. Manage their client’s money. They have control over the client’s stock accounts and manage large amounts of money, and are usually used by people with high incomes.
  2. Full Service Brokers: They provide full service. Assessing your resources available and the goals you expect to achieve is part of their job. They meet you personally and take all factors in their count like your age, marital status, pending debts etc.
  3. Brokers Online: This is the most economical choice though not providing as many services. They basically give you basic assistance through the internet or the phone.
  4. Discount Brokers: These are a step ahead of the online brokers. They provide a little more service but charge a fee higher than the online brokers.

  • The Different Types Of Stocks To Invest In: There are stocks, mutual funds, index funds and exchange trade funds to consider before you begin investing. Buying stocks of individual companies is also an option. All these options have their own advantages and disadvantages which should be discussed with your broker. In case of individual stocks there are no ongoing charges once the broker is paid for the transaction. This gives you more control over your stocks and you can trade with them whenever you want as you see the way the company is operating. Individual stocks are more risky but often pay more. The major drawback of individual stocks is you are on your own and have no professional guidance. Another drawback of investing in individual companies leaves you vulnerable to the fate of the company.

If you can’t afford a risky option yet then you can invest in other stocks as well like

  • Mutual Funds: This is a low risk alternative. The money is handled by professionals and is invested in many places as opposed to any one. This diversification protects your investment from risks.
  • Index Funds: This is similar to the mutual funds but it tracks a particular segment of the market index, and replicates it. These are a bit costly to trade.
  • ETF: Trading in ETF’s costs less and is less risky as well.