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Most investors seem confused by an easy stock market for dummies concept, diversification.  One of the most important rules of investing is to always stay diversified across the different sectors in the market.  Most get confused about the differences between industries and sectors and that’s why they have trouble with stock portfolio diversification.  So let’s say you owned five companies in one portfolio and two of those companies are San Disk (semi-conductor, computer chips) and Apple (software).  Although these two companies are completely different as they operate in different industries, they are still in the same sector so by owning both, you’ll be in danger of sector risk.