Investing is critical to ensuring your long-term financial stability. However, all investments come with some level of risk. The higher the risk, sometimes the higher the returns. However, this shouldn’t scare you off. There are ways to minimize your exposure and increase your chances of success. Among these is diversification. Putting all your eggs in one basket leaves you vulnerable to market shocks, so having a range of different investments in your portfolio protects you from short-term fluctuations. Looking to diversify? Here’s how.
If you consider yourself to be a bit of a property guru, then go right ahead and consider a commercial property investment. Traditionally, commercial properties have far lower overheads than residential real estate, and to have a decent rental income yield as well. What’s more, historically prices have been stable, offering peace of mind that it’s a potentially prosperous investment option that will fare well in the long-term.
Spread Your Wealth
Diversification is pivotal to your financial success, which is why spreading your wealth is an excellent way in which to grow and diversify your portfolio. While you might find there are a few standout stock options such as Facebook and Starbucks that will do your bottom line well over the coming years, they are also equally as capable of plummeting. If you invest all your money in only one, you risk losing it all. Consider investing in a handful of companies you trust and with which you are familiar.
If you want to ensure you’re hedging your portfolio against market volatility in the best possible way, then consider index funds or even fixed-income funds. While it’s a unique investment option, it’s one that enables you to invest for long-term success as opposed to short-term gains. You are also minimizing your risk of market uncertainty which is all too common with everyday stocks and investment options.
If your long-term investments are experiencing healthy, consistent growth, then there’s every reason to decide to throw caution to the wind and get a bit risky with a few other options. By taking on a bit more risk, you are able to earn better returns – even if you could also end up losing it all. Look at investment options in construction, technology, and even healthcare. You may even find benefit in small-cap stocks, although the market tends to fluctuate dramatically in this area.
Spot the Oddity
Every now and again, something will pop up on the market that has you considering opening your wallet. Go with your gut. Something you think to be a little “out there” can end up making you a considerable amount of money. Take cryptocurrency, for example. Bitcoin started its life worth a mere $1 in February 2011 but hit nearly $20,000 in December 2017. Take a punt and diversify your investment portfolio at the same time. It might not pay off, but it also may. You can also look at entrepreneurs seeking to get new businesses off the ground. Spot the potential, invest, and take a punt on whether the product or service they launch will take off.
Being financially secure can put a lot of people off growing and diversifying their portfolio. Why, if it’s going so well, would you take the risk? Because it can all go wrong in a heartbeat. If you put all your eggs in one basket, that basket could fall on the ground and take your money with it. However, if you start trying new things, spreading out your wealth, and taking a punt on new innovations, you can end up in a far better financial situation.