If you know anything about investing, you’ll know that varying your investment portfolio is really important. If you put all of your eggs into one basket, then you can end up making poor returns on investment and in some cases no return on your investment at all. These simple tips will help you when it comes to varying your portfolio:
Learning About the Different Assets
The things you invest your money in are called assets. Before you can diversify your portfolio, you need to know all about these different assets so you can choose the right ones for you. It all depends on how comfortable you feel with taking a risk, and what your financial situation looks like at the moment.
The risk of putting your cash into savings accounts and similar investments is low. However, you won’t make as much interest over time as inflation does it’s thing. Putting your money into gilts, which are government bonds and overseas bonds, have a fairly low risk too. In the same way as savings accounts can be affected by inflation, so can these bonds. If inflation is higher than the interest paid, your savings can be eaten away at.
Holding shares in a company is popular, but this is a high risk investment. The risk levels will vary depending on lots of different aspects. The kind of company you invest in is totally up to you. It’s best to invest in something you feel comfortable with first, such as company you know of or are interested in.
Investing in commercial or residential property can be extremely lucrative, but you need to be prepared to lose money too. There are some investments that can be a little unpredictable when it comes to the amount of risk you’re taking. PM coins and bullion can be good investments. Collectables, fine wine, gold and art too.
It’s possible to diversify your portfolio with an asset class. With just shares, it’s possible to spread your investments between things like oil, companies, and overseas markets.
Have you noticed that your portfolio is focused mostly on one particular asset? Then it is time to diversify. If you have all of your cash in one savings account or you’ve invested heavily into one business, look for ways you can change that.
Your Attitude to Risk Taking
Remember, a diverse portfolio is important but your attitude to risk taking is even more so. If keeping the majority of your money safe is important to you, then you’ll need to look at things like fixed interest securities. There are even some investments that are so high risk you’re better off steering well clear of them. If you need more help with diversifying your portfolio, then a financial advisor can help you. They’ll look at your current investments, ask you important questions and tell you where best to put your money. This is a good idea if the changes you need to make are fairly complicated.
Hopefully this guide has helped you to think about diversifying your portfolio. Good luck!