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Take Nvidia, for example.
I ended up buying three, Sethi said.
JDS Uniphase, Excite and Amazon.
Latching on to a needle-in-a-haystack winner seldom happens.
Rebalancing is the practice of mitigating volatility and managing potential risk in your investment portfolio.
What happens if one of those stocks goes down by half?
And if youre stuck obsessing about individual stocks, odds are, you are not rebalancing properly.
Rebalancing your portfolio is not a one-time deal.
you better be constantly tweaking, strategizing and adjusting your investments to match evolving financial goals.
Sethi encouraged investors to focus ontarget date funds, rather than individual stocks.
These are automatically diversified and rebalance as you age.
Money gets especially emotional when all of yours is riding on just a few stocks.
Youre likely to react dramatically to dramatic shifts.
When a stock goes up, you may react by buying more.
When a stock goes down, you react by selling.
Just buy on a regular basis, Sethi said.
Its called dollar cost averaging.
This method lowers your average cost per share, and hedges against volatility.
Index fund investing is a great way to do this.
Why waste time doing something that is a near guaranteed money loss?
Plus, youre competing against millionaire Wall Street executives who spend their entire days analyzing stocks.
Are you going to outwit them?
Just invest in low-cost index funds and save yourself a ton of futile research and emotional turmoil.
The bottom line is, you just cant compete against the global market, so dont bother trying.
Go simple and invest in an index fund like the S&P 500 fund.
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