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Hi porper

I can see what you're getting at and my interpretation of your post is that:

The higher the risk = the higher POTENTIAL reward and not necessarily guaranteed reward which I believe most will agree with.

Imo investing the whole $50k in one XYZ stock is technically a higher risk investment than spreading it over say 5 stocks with the same potential prospects as stock XYZ. Even by putting $25k into two similar stocks means you can still have the same potential total gain if they both shoot up or you can still have a nett gain if one shoots up and the other falls to your 2% stop loss level. And if they both fall to your 2% S/L level then your loss is the same as you would have suffered had you only invested in one stock.

So I suppose how far one diversifies firstly depends on how much capital they have and secondly on how much of that capital they want to expose to one stock, sector, market, asset class or global region.

eg.....in the current ASX share market game mrs bullmarket and I are holding a total of 7 stocks which are netting a positive gain atm (some stocks are up, some are down) at about the national average. Sure, our nett gain would be much higher if we invested the whole $50k for the game in the best performing stock.

However, one point you make that I disagree with is:

I disagree it is impossible to lose money in this case because I see paper losses as real losses......others for their own reasons don't see paper losses as being real and that's fine, each to their own on this one But I accept paper losses could be much more relevant to a day or short term trader than say a long term investor.

eg.....if your $50k trade entry rises say 5% or whatever and you then watch it fall back to your original $50 and close out then sure, you haven't lost any original capital but imo you have still lost that 5% rise of which you had the option to close out on if you chose to, everything else being equal.

Imo, what you are saying in the above extract is that if on Eddie's show a contestant gets the $1M question wrong and then drops back to $32k that he/she hasn't lost $468k when in fact they had the option to take the $500k.
Imo that contestant in one instance had $500k secured in their pocket and then blew it and effectively lost it.

cheers

bullmarket

<blockquote data-quote="bullmarket" data-source="post: 37712" data-attributes="member: 2453">Hi porper <img src="data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7" class="smilie smilie--sprite smilie--sprite1" alt=":)" title="Smile&nbsp; &nbsp; :)" loading="lazy" data-shortname=":)" />I can see what you&#039;re getting at and my interpretation of your post is that:The higher the risk = the higher POTENTIAL reward and not necessarily guaranteed reward which I believe most will agree with.Imo investing the whole $50k in one XYZ stock is technically a higher risk investment than spreading it over say 5 stocks with the same potential prospects as stock XYZ.&nbsp; Even by putting $25k into two similar stocks means you can still have the same potential total gain if they both shoot up or you can still have a nett gain if one shoots up and the other falls to your 2% stop loss level.&nbsp; And if they both fall to your 2% S/L level then your loss is the same as you would have suffered had you only invested in one stock.So I suppose how far one diversifies firstly depends on how much capital they have and secondly on how much of that capital they want to expose to one stock, sector, market, asset class or global region.eg.....in the current ASX share market game mrs bullmarket and I are holding a total of 7 stocks which are netting a positive gain atm (some stocks are up, some are down) at about the national average.&nbsp; Sure, our nett gain would be much higher if we invested the whole $50k for the game in the best performing stock. However, one point you make that I disagree with is: I disagree it is impossible to lose money in this case because I see paper losses as real losses......others for their own reasons don&#039;t see paper losses as being real and that&#039;s fine, each to their own on this one <img src="data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7" class="smilie smilie--sprite smilie--sprite1" alt=":)" title="Smile&nbsp; &nbsp; :)" loading="lazy" data-shortname=":)" />&nbsp; But I accept paper losses could be much more relevant to a day or short term trader than say a long term investor.eg.....if your $50k trade entry rises say 5% or whatever and you then watch it fall back to your original $50 and close out then sure, you haven&#039;t lost any original capital but imo you have still lost that 5% rise of which you had the option to close out on if you chose to, everything else being equal.Imo, what you are saying in the above extract is that if on Eddie&#039;s show a contestant gets the $1M question wrong and then drops back to $32k that he/she hasn&#039;t lost $468k when in fact they had the option to take the $500k.Imo that contestant in one instance had $500k secured in their pocket and then blew it and effectively lost it.cheersbullmarket <img src="data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7" class="smilie smilie--sprite smilie--sprite1" alt=":)" title="Smile&nbsp; &nbsp; :)" loading="lazy" data-shortname=":)" /></blockquote>

[QUOTE="bullmarket, post: 37712, member: 2453"] Hi porper :) I can see what you're getting at and my interpretation of your post is that: [B]The higher the risk = the higher POTENTIAL reward[/B] and not necessarily guaranteed reward which I believe most will agree with. Imo investing the whole $50k in one XYZ stock is technically a higher risk investment than spreading it over say 5 stocks with the same potential prospects as stock XYZ. Even by putting $25k into two similar stocks means you can still have the same potential total gain if they both shoot up or you can still have a nett gain if one shoots up and the other falls to your 2% stop loss level. And if they both fall to your 2% S/L level then your loss is the same as you would have suffered had you only invested in one stock. [I]So I suppose how far one diversifies firstly depends on how much capital they have and secondly on how much of that capital they want to expose to one stock, sector, market, asset class or global region.[/I] eg.....in the current ASX share market game mrs bullmarket and I are holding a total of 7 stocks which are netting a positive gain atm (some stocks are up, some are down) at about the national average. Sure, our nett gain would be much higher if we invested the whole $50k for the game in the best performing stock. However, one point you make that I disagree with is: I disagree it is impossible to lose money in this case because I see paper losses as real losses......others for their own reasons don't see paper losses as being real and that's fine, each to their own on this one :) But I accept paper losses could be much more relevant to a day or short term trader than say a long term investor. eg.....if your $50k trade entry rises say 5% or whatever and you then watch it fall back to your original $50 and close out then sure, you haven't lost any original capital but imo you have still lost that 5% rise of which you had the option to close out on if you chose to, everything else being equal. Imo, what you are saying in the above extract is that if on Eddie's show a contestant gets the $1M question wrong and then drops back to $32k that he/she hasn't lost $468k when in fact they had the option to take the $500k. Imo that contestant in one instance had $500k secured in their pocket and then blew it and effectively lost it. cheers bullmarket :) [/QUOTE]

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