Diversifying your portfolio means putting your money into a variety of different types of investments, instead of putting all your eggs in one basket. The idea behind diversifying your portfolio is to reduce risk.
To illustrate, if one or a few of your investments perform poorly, the rest of your investments will keep your portfolio strong. Most standard investments tend to earn money over time, so if you diversify your portfolio, your overall earnings will increase over time, even if a few of your investments suffer.
Diversifying your investments can be challenging, but we’re here to help get you started on the right path. In this article, we discuss three best-practices for portfolio diversification, as well as how you can receive professional guidance to help ensure you invest intelligently and grow your savings.
Three Portfolio Diversification Best-Practices
While there are many things to consider while creating your investment strategy, the following are three key best-practices to keep in mind:
- Invest in a Diverse Range of Industries: As mentioned earlier, it is important to not put all your eggs in one basket because by doing so, you risk your entire portfolio falling apart if one industry hits a rough patch. So, we recommend investing in a wide range of industries to spread out your risk and increase the chances that your portfolio grows at a steady pace. For example, instead of putting all your money in tech stocks, try spreading out your investments among stocks in tech, banking, retail, manufacturing, and more.
- Invest in Mutual Funds: Mutual funds are funds managed by large investment firms — such as Fidelity or Charles Schwab — in which individuals can invest. These funds consist of up to dozens of stocks or other securities from any given industry. For example, a tech mutual fund is an investment fund that consists of dozens of tech stocks and securities. The idea of a mutual fund is that if one or two of the stocks in the fund perform poorly, the rest will keep the fund growing over time.
- Consider Real Estate Investment: The stock market isn’t the only place you can invest your savings. Another excellent and generally safe investment can be real estate. Whether you choose to invest as a partner in a commercial real estate property, or as a homeowner and landlord, real estate investment can provide a constant stream of income. Also, property value tends to increase over time, making real estate an appealing investment opportunity. Please note, though, that real estate investment still has its risks. So, we recommend working with an advisor to help ensure you invest intelligently.
Get Professional Help with Your Portfolio Management
If you are not an investment expert, we recommend seeking professional help with your portfolio management. While you would of course have to pay for this help, the amount of money you will make by investing properly will far outweigh the cost of a financial advisor.
If you would like help with your portfolio management, please do not hesitate to reach out. With the full range of accounting services Allman & Allman APAC provides, we are equipped with the expertise for which you may be in need. Seeking guidance from our firm will provide you the opportunity to work with individuals armed with broad and deep financial knowledge, able to provide advice on a wide range of issues. As a full-service public accounting firm, our professional services will surely help you succeed and thrive. Please feel free to reach out to Allman & Allman APAC via email at Genna@allmancpa.com or via phone at 760-773-1120 to discuss your situation and find out how we can help you grow. We look forward to hearing from you.