This is a fun way to look at different types of stocks and relating them to vehicle.  Hopefully your investing garage has several different vehicles that will give you proper diversification.  Although your actual garage might only have one or maybe two cars, there’s no question that having a diversified investment garage of stocks is essential in wealth building.  Although we’re taking this fun approach to relating stocks to vehicles, keep in mind the importance of diversification above all else.

The Bentley

bentleyThis is a large, powerful, expensive ride.  We’re thinking Berkshire Hathaway A class shares.  It will deliver the investor nothing but a smooth comfortable ride to your destination.  But trying to buy one might be a tough task.  They are expensive to buy in to and once people own one they hang on to it for a really long time.  The BRK.A trades around $102,000 per share and daily volumes are usually measured in the hundreds per day (as opposed to millions like most stocks).

Berkshire Hathaway stock quote

The Jeep

JeepThese stocks are the ones that just won’t quit.  They can withstand rough terrain and continue to keep you intact and deliver on what they promise.  Typically in the stock market these are referred to as defensive stocks.  A couple of great examples are Coca-Cola and Proctor & Gamble.  Expect this type of stock to perform better than average during market down turns, but also expect it to underperform during expansionary times.  The Jeep brings balance to your portfolio.

Coca-Cola stock quote

The Sedan

sedanThe reliable one that almost everyone owns.  It goes with the flow whether that’s a good or a bad thing.  These vehicles are going to try to balance growth, security, and income all in one.  They are trying to please everyone, and the best way to do that is by being a bit like everyone.  This is an index ETF like iShares XIU. These are generally widely held by many and are very easy to buy and sell because there’s always someone out there interested in buying it.

iShares XIU ETF quote

The Sports Bike

bikeThis is the small fast moving vehicle that will get you to your goal in a hurry.  Not even one of those sporty growth stocks can keep up with the pace of these stocks.  They are penny stocks.  They are small and fast, but also risky.  If you risk it all on one of these things and you fall, there’s a good chance you’re not getting back up.  For this reason you can’t rely on them for your only mode of transportation.

Start Your Engines

So what type of stocks will you have in your investment garage?  Having a mix of everything would be ideal but we all can’t afford the Bentleys and not everyone has the stomach for sports bikes.  It’s up to you to decide what is in your garage but I hope you’ve enjoyed this ride!

Technorati Tags: investing basics, penny stocks blog, stock market, stock market money