Suze Orman Says a Diverse Portfolio Is Important. Here's an Easy Way to Achieve One
- A diversified portfolio can help you grow wealth and protect you from losses.
- One key brokerage account feature makes it easy to build a diverse mix of investments.
The right brokerage account could be your ticket to a well-balanced investment mix.
These days, many investors are reeling due to losses (or at least on-screen losses) in their brokerage accounts. The stock market just had a miserable first quarter of 2022, and we don't know how long it will take for portfolios to recover.
Financial guru Suze Orman is sympathetic to those who are rattled by recent stock market events. But she also says that it's important to maintain a diverse portfolio, because having one could make situations like the current market downturn more bearable.
Not only can a diverse mix of investments help limit your losses during periods of decline, but it can also be your ticket to growing more wealth over time. And if you're eager to build as diverse a portfolio as possible, there's one key brokerage account feature it pays to look for.
The option to buy the shares you want
It's possible to buy some stocks for as little as $10 per share, while others cost $1,000 per share or more. That can be challenging if you want to invest but don't have a ton of money to work with. But if you choose a brokerage account that offers fractional investing, money (or a lack thereof) doesn't have to be a barrier to owning the stocks you're interested in.
Fractional investing lets you buy a piece of a share of stock if you can't afford a full share. So, let's say there's a company you want to invest in that's trading for $1,000 a share, but you only have $250 at your disposal. With fractional investing, you can buy a quarter-share of that stock, and as it gains value, you'll benefit proportionately.
So, let's say that company's share price increases to $1,200 over time. You won't be up $200 in your brokerage account because you don't own a full share. Rather, you'll be up 25% of that, or $50.
Similarly, let's say that stock makes a quarterly dividend payment of $40. You'll get a $10 payment since you own a quarter of a share.
Fractional investing can lend to more diversity in your portfolio because you'll have the option to buy partial shares of many companies instead of being limited to whole shares of just a few companies. And companies that may have otherwise been out of reach financially could become viable investments for you.
Now, most major brokerages these days do offer the option to invest in stocks on a fractional basis. But if you already have a brokerage account and it doesn't give you that option, it may be time to switch.
Take Orman's advice to heart
Branching out in your portfolio and loading up on a wide range of stocks is an important step toward growing wealth and minimizing losses during a downturn. Fractional investing makes diversifying easy, so be sure to take advantage of that option if it's available to you. And if you've yet to begin investing but are looking to get started, aim to find a brokerage account that offers the option to buy fractional shares.
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