Invest In What You Know Best

Investing in an industry or a company where you have been employed can be as profitable as diversification in a portfolio. Anyone who has worked in the business would undoubtedly have special insight into how the company works. This understanding could be worth more than spending numerous hours analyzing the company's balance sheet.

There is a problem with this strategy, however, and it lies in the investor's vulnerability to public relations. Because investors are unfamiliar with what is real and what is mere "window dressing," it is more difficult for an investor to discern which information is most significant.

The learning curve regarding investing is steep, and mistakes can be costly. But by investing in companies or businesses an investor knows and understands, this can significantly reduce the amount of information to learn. And this can also lead to quick understanding and faster decisions when it comes time to buy or sell the stock.

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