Stocks by Sectors

“Bonky!!!!!!” squalled honky on seeing him after two days.

“Hi Honky! How is your trade going on!!”

“Its fine bonky!! This simulator is enthralling! I lost 1200 dollars in last two days trade .”

“oh! That’s fine what are all the stocks you hold”

“GOOGLE,YAHOO,INTEL…”So went the Honkys list.

“Cool!! This is what first time investors often do” said Bonky.

“Are they good stocks!!Those are the names I have heard good enough and hence bought those”

“No can given a solid discernment when it comes to stocks.But yet your portfolio is not good”

“Why do you say like that.I hold all the big names in NYSE”

“Might be but what counts at the end of the day is the earning you get while you sell those.But see what happened to you!! Inspite of holding the bignames you lost 1200 dollars” ,Bonky appeared as if he is going to give a big lecture on this today.

“Oh!!Ya why did it happened like that! What do you mean by portfolio!!How should it be”

“Portfolio is the total holdings of your securites. Yours is not good because its not diversified”

“Diversified!!??” Interrupted Honky.

“You should have invested in different places!”

“What only NYSE is available in that game”

“Hey hold on! I meant your investment should be across all the sectors.Stocks can be classified by several types.Hope I had already told you about the classification based on size of the stock.Now let me tell you the division of stocks by sectors which is the most important thing for an investor”

“why?”

“Because in order to minimize the risk its always better to spread your investment in various sectors. For instance as you made its wise to invest in IT and blue chip industries as their growth rate is massive now.But what will happen when the industry goes down all of a sudden.You will have to lose your whole bag.Instead if you had split your investments in various sectors you could breathe a bit!” narrated the master.

The student was still nebulous “Make it litlle more clear Bonky”,

“Ya let me take some examples related to current scenario. As you know IT is accrues faster than other industry.Hence you can have 30 % of your bet there.The construction industry is also on growth pace and place 20% of your money there.The media is having the best of its times, So pick some shares from their profit also.This is attacking part of your portfolio.Since those pieces come from the most traded part they may give higher returns at the expense of higher risk”

“mm..So what should I do the remaining.??Have it safe in my pocket??”questioned Honky.

“Ha ha !1 having it in your pocket is worth not having it at all after inflation has beaten it!”

“Then what to do”

“Invest it in stable stocks man..Common try to find the stable stocks.” Bonky ended up giving an assignment to Honky and all of us.

NUCH CORNER: One lakh rupees invested in BSE in 1979 would have now accrued to 14 Crores.