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In tough times like these, it is great if you have several sources of income. One way people do that is to make money from their investments and the stock market is the most common way.

The stock market allows you to own a part of some of the biggest companies in the world and some of the smaller ones as well. These companies have gone public because it is a way for them to get more money and grow bigger. Their hope is to become even more successful and if that happens, everyone wins.

A good question to ask is whether it is smart to put all your money in one stock or should you diversify and put smaller amounts in different stocks? Most financial advisors will tell you that the safest thing to do is to make sure you have your money in a variety of stocks that are in several different industries. The money you have to invest is most likely money you will need later so it is important to try and invest smartly rather than gamble everything all on one stock.

Putting all your money into one stock means that you could have bigger losses and bigger gains than if you diversify and put your money into a basket of stocks. With multiple holdings in your portfolio, a bad year from one of the stocks can be offset by the other stocks that might have done better. The preservation of capital is important for most people and diversification will help that happen.

If you have all your money in just one stock, it also means that if you decide to sell that stock then you will be completely out of the market. With diversified holdings, selling one stock or a couple of stocks means that you still have the remainder of your money working for you in the market.

Any responsible investor should do all they can to protect their money from being exposed to risk. Stock diversification is the way most investors do that and by spreading their money between multiple stock picks, they know that all their eggs are not in one basket and they can sleep better at night.

Would you like to learn how to buy stocks online for beginners? If that is what you are looking for, please go to Stock Market For Dummies.