Getting started in stock with one special field of activity
I don't think investing in only one industry, which you may know well, is very wise. You may want to invest in that industry but you should not restrict yourself from investing solely in that industry.  There are many times when your chosen industry may not be performing very well and other industries are performing much better. If you restrict yourself to just one industry you may be either out of the market for long periods of time or your portfolio may show negative returns for extended periods of time. You may want to know an industry or a number of companies very well but do not fall in love with them. The worst thing you can do is get emotional about an investment, an investment is there to make you money not for you to get emotional about. Don't restrict yourself, instead look to maximise your returns with investments that are performing better at the time. Investing only in one industry may be problematic as it is highly correlated. There are factor outside your (or anyones) knowledge which may affect all the industry: If you are familiar with the industry it may happen that you work in that (ignore rest of paragraph if this is not the case). In such case you are likely to have problems at work (frozen salary, no bonus, position terminated) and you need to liquidate the investments at that point (see many advice regarding ESPP). Depending on your field you may have some inside knowledge so even if you would took a position without it you may need to somehow prove it. On the other hand diversifying the investment might reduce the volatility of investment. Rise in oil will cause problems for air industry but will be a boom for oil industry etc. In this way you smooth the grow of the investments. Investing part of portfolio into specific industry may make more sense. It still possibly worth to avoid it at the beginning investor may have trouble to beat the market (for example according to behavioural economics you are exposed to various biases, or if markets are efficient then prices most likely already take into account any information you may have). (I'm still new to all this so it's mostly based on what I read rather then any personal experience. Also a standard disclaimer that this is not an investment, or any other, advice and I'm not licensed financial advisor in any jurisdiction) You are always best off investing in things you understand. If you have a deep understanding of the aeronautical industry, say, you are a Vice President at Boeing and have been working at Boeing for 40 years, then that would be a reason for investing in that sector: because you may be able to better evaluate different companies in that sector. If you are a novice in the sector, or just have an amateur interest in it, then it may not be a good idea, because your knowledge may not be sufficient to give you much of an advantage. Before focusing on one investment of any type, industry sector based, or otherwise, you want to ask yourself: am I an expert in this subject? The answer to that question will have a big impact on your success. "It depends on what you're talking about. If this is for your retirement accounts, like IRAs, then ABSOLUTELY NOT! In your retirement accounts you should be broadly diversified - not just between stocks, but also other markets like bonds. Target retirement funds and solid conservative or moderate allocation funds are the best 'quick-and-dirty' recommendation for those accounts. Since it's for the long haul, you want to be managing risk, not chasing returns. Returns will happen over the 40 or so years they have to grow.  Now, if you're talking about a taxable stock account, and you've gotten past PF questions like ""am I saving enough for retirement"", and ""have I paid off my debt"", then the question becomes a little more murky.  First, yes, you should be diversified. The bulk of how a stock's movement will be in keeping with how its sector moves; so even a really great stock can get creamed if its sector is going down. Diversification between several sectors will help balance that.  However, you will have some advantage in this sector. Knowing which products are good, which products everybody in the industry is excited about, is a huge advantage over other investors. It'll help you pick the ones that go up more when the sector goes up, and down less when the sector goes down. That, over time and investments, really adds up. Just remember that a good company and a good stock investment are not the same thing. A great company can have a sky-high valuation -- and if you buy it at that price, you can sit there and watch your investment sink even as the company is growing and doing great things. Have patience, know which companies are good and which are bad, and wait for the price to come to you.  One final note: it also depends on what spot you are in. If you're a young guy looking looking to invest his first few thousand in the market, then go for it. On the other hand, if you're older, and we're talking about a couple hundred grand you've got saved up, then it's a whole different ball of wax. It that spot, you're back to managing risk, and need to build a solid portfolio, at a measured pace."
&gt;Clarisse Kambire’s nightmare rarely changes. It’s daytime. In a field of cotton plants that burst with purple and white flowers, a man in rags towers over her, a stick raised above his head. Then a voice booms, jerking Clarisse from her slumber and making her heart leap. “Get up!”      Ok...      &gt;The man ordering her awake is the same one who haunts the 13-year-old girl’s sleep: Victorien Kamboule, the farmer she labors for in a West African cotton field. Before sunrise on a November morning she rises from the faded plastic mat that serves as her mattress, barely thicker than the cover of a glossy magazine, opens the metal door of her mud hut and sets her almond-shaped eyes on the first day of this season’s harvest.      This reads like a bad novel.      &gt;She had been dreading it. “I’m starting to think about how he will shout at me and beat me again,” she said two days earlier. Preparing the field was even worse. Clarisse helped dig more than 500 rows with only her muscles and a hoe, substituting for the ox and the plow the farmer can’t afford. If she’s slow, Kamboule whips her with a tree branch.      GET TO THE POINT ALREADY!!! "An Exchange-Traded Fund (ETF) is a special type of mutual fund that is traded on the stock exchange like a stock.  To invest, you buy it through a stock broker, just as you would if you were buying an individual stock. When looking at a mutual fund based in the U.S., the easiest way to tell whether or not it is an ETF is by looking at the ticker symbol.  Traditional mutual funds have ticker symbols that end in ""X"", and ETFs have ticker symbols that do not end in ""X"".   The JPMorgan Emerging Markets Equity Fund, with ticker symbol JFAMX, is a traditional mutual fund, not an ETF.  JPMorgan does have ETFs; the JPMorgan Diversified Return Emerging Markets Equity ETF, with ticker symbol JPEM, is an example.  This ETF invests in similar stocks as JFAMX; however, because it is an index-based fund instead of an actively managed fund, it has lower fees. If you aren't sure about the ticker symbol, the advertising/prospectus of any ETF should clearly state that it is an ETF.  (In the example of JPEM above, they put ""ETF"" right in the fund name.)  If you don't see ETF mentioned, it is most likely a traditional mutual fund. Another way to tell is by looking at the ""investment minimums"" of the fund.  JFAMX has a minimum initial investment of $1000.  ETFs, however, do not have an investment minimum listed; because it is traded like a stock, you simply buy whole shares at whatever the current share price is.  So if you look at the ""Fees and Investment Minimums"" section of the JPEM page, you'll see the fees listed, but not any investment minimums." "I compared investing in real estate a few years ago to investing in stocks that paid double digit dividends (hard to find, however, managing and maintaining real estate is just as hard).  After discussing with many in the real estate world, I counted the average and learned that most averaged about 6 - 8% on real estate after taxes.  This does not include anything else like Dilip mentions (maintenance, insurance, etc).  For those who want to avoid that route, you can buy some companies that invest in real estate or REIT funds like Dilip mentions.  However, they are also susceptible to the problems mentioned above this. In terms of other investment opportunities like stocks or funds, think about businesses that will always be around and will always be needed.  We won't outgrow our need for real estate, but we won't outgrow our need for food or tangible goods either.  You can diversify into these companies along with real estate or buy a general mutual fund. Finally, one of your best investments is your career field - software.  Do some extra work on the side and see if you can get an adviser position at a start-up (it's actually not that hard and it will help you build your skill set) or create a site which generates passive revenue (again, not that hard).  One software engineer told me a few years ago that the stock market is a relic of the past and the new passive income would be generated by businesses that had tools which did all the work through automation (think of a smart phone application that you build once, yet continues to generate revenue).  This was right before the crash, and after it, everyone talked about another ""lost decade.""  While it does require extra work initially, like all things software related, you'll be discovering tools in programming that you can use again and again in other applications - meaning your first one may be the most difficult. All it takes in this case is one really good idea ..." "The argument you are making here is similar to the problem I have with the stronger forms of the efficient market hypothesis.  That is if the market already has incorporated all of the information about the correct prices, then there's no reason to question any prices and then the prices never change.  However, the mechanism through which the market incorporates this information is via the actors buying an selling based on what they see as the market being incorrect. The most basic concept of this problem (I think) starts with the idea that every investor is passive and they simply buy the market as one basket.  So every paycheck, the index fund buys some more stock in the market in a completely static way.  This means the demand for each stock is the same.  No one is paying attention to the actual companies' performance so a poor performer's stock price never moves.  The same for the high performer.  The only thing moving prices is demand but that's always up at a more or less constant rate. This is a topic that has a lot of discussion lately in financial circles.  Here are two articles about this topic but I'm not convinced the author is completely serious hence the ""worst-case scenario"" title. These are interesting reads but again, take this with a grain of salt.  You should follow the links in the articles because they give a more nuanced understanding of each potential issue.  One thing that's important is that the reality is nothing like what I outline above. One of the links in these articles that is interesting is the one that talks about how we now have more indexes than stocks on the US markets.  The writer points to this as a problem in the first article, but think for a moment why that is.  There are many different types of strategies that active managers follow in how they determine what goes in a fund based on different stock metrics.  If a stocks P/E ratio drops below a critical level, for example, a number of indexes are going to sell it.  Some might buy it.  It's up to the investors (you and me) to pick which of these strategies we believe in. Another thing to consider is that active managers are losing their clients to the passive funds.  They have a vested interest in attacking passive management." "You need to negotiate with your broker to allow you to do more exotic order types.  One in particular I recommend is a ""hidden"" aka iceberg order.  You enter two numbers.  The first is the number of shares for your entire order, the second is the amount that will be displayed in the book (this is the tip of the iceberg, the remaining shares are hidden below the surface). The maker/taker rule applies as follows: The amount displayed will receive the rebate for providing liquidity.  The amount hidden will be charged the fee for taking liquidity. Example: You want to sell 10,000 shares total.  You enter a hidden order for 10,000 shares with 1,000 displayed.  On the level 2 screen traders will see 1,000 shares, and those shares will stay displayed there until the entire order is filled.  You receive a rebate for 1,000 shares, you pay the brokerage fee for 9,000 shares. Also, like one of the previous posters mentioned, only trade high liquidity stocks.  Large market cap companies with high volume.  This is why day traders love Tesla, Amazon, Netflix, etc. Large market cap, high volume, and high volatility.  Easy to catch $10+ moves in price. Hope this helps Happy trading" "I would just buy one ETF (index-fund) on the market you think will perform better. It will take care to buy the 5 most solid stock in this market and many other more to reduce the risk to the bear minimum. You will also spend only few bucks in comissions, definitely less than what you would spend buying multiple stocks (even just 5). It's hard enough to forecast which market will perform better, it's even harder to do stock picking unless you have the time and the knowledge to read into companies' balance sheets/economic incomes/budgets/market visions etc. And even if you are great in reading into companies balance sheets/economic incomes/budgets, the stock market usually behaves like a cows' drove, therefor even if you choosed the most valuable solid stocks, be prepared to see them run down even a 50% when all the market runs down a 50%. During the 2008 crisis the Europe market has lost a 70%, and even the most solid sectors/stocks like ""Healthcare"" and ""Food & Beverage"" lost a painful 40% to 50% (true that now these sectors recovered greatly compared to the rest of the market, but they still run down like cows during the crisis, and if you holded them you would have suffered a huge pain/stress). But obviously there's always some profet/wizard which will later tell you he was able to select the only 5 stocks among thousands that performed well." "Consider the futures market. Traders buy and sell gold futures, but very few contracts, relatively speaking, result in delivery. The contracts are sold, and ""Open interest"" dwindles to near zero most months as the final date approaches. The seller buys back his short position, the buyer sells off his longs.  When I own a call, and am 'winning,' say the option that cost me $1 is now worth $2, I'd rather sell that option for even $1.95 than to buy 100 shares of a $148 stock. The punchline is that very few option buyers actually hope to own the stock in the end. Just like the futures, open interest falls as expiration approaches." "I have an MScF (Undergrad Math/Econ) and I currently work in algo trading, I started off on the buy side and then went off on my own after I got a large enough bonus for seed capital,.... :)  Quantitative Finance is not a ""small field"" within it there are subfields (there are much more subfields that these).  Econometrics/Statistical/Research methods, time series analysis, statistics, stochastic calculus, data mining  Asset Management/Trading: Building testing and implementing models, usually you have an idea, test it and implement it, requires a lot of good time series skills, statistical skills and programming and be good at research.  Modelling/Pricing/Risk, building better pricing models, coming up with elegant solutions, so a strong knowledge of stochastic calc, Differential Equations, Partial Differential Equations, Monte Carlo Simulations, etc  12 Months will not make you an expert in any of the above. You may learn enough to understand it. Quant Finance is something you learn by doing, yes you need to understand the theory but its just theory until you start to implement it.   Finally if you do an MFin/MscF/MFE make sure there is a THESIS otherwise it will be tough to do a PhD after.  If you want a taste, grab some R/Matlab/Whatever and try and program some common SSRN papers.."