Speak to anyone in finance, or the financial sector, and they will tell you that one of the best things you can do with your investment portfolio, is to diversify it. But why should you? What are the benefits of diversifying? And how do you do it?
Simply put, diversifying your portfolio means spreading your investments across bonds, stocks, cryptocurrency, etc. It is a great way to minimise risk, as well as maximising return as you will have a number of avenues to make money, and with everything being on the internet right now, you can do this all from the comfort of your home. Online is the way to go.
The first thing to remember is that quality will always beat quantity. A mistake that people can sometimes make is just investing in everything that looks good, hoping to strike gold and one will pay off.
It is still important to remember that a diverse portfolio is something that pays off in the long run, and that you need to make quality investment decisions, not investments that you think will make you a quick buck.
Another aspect is having cash on hand. Many investors go so deep into the investment hole that they end up not having enough cash on hand to deal with any unforeseen circumstances, or use to take advantage of a situation that arises.
You don’t want all of your money tied up in investments, because if one starts going pear shaped, you don’t have the cash to recover. And as mentioned, no opportunities pop up every day, you want to be able to get involved, and you need cash to do so.
Diversity is the name of the game, but don’t just diversify within one sector. Considering you can invest in bonds, mutual funds, real estate, stocks, and cryptocurrency, get involved in all of them, barring real estate, you can invest small amounts in stocks and crypto’s to feel it out first.
Cryptocurrency is also still in its infancy, this is an avenue that should most definitely not be overlooked. Bitcoin may have had a huge spike already, but it is still a solid investment that will pay off no matter when you get involved.
Bitcoin is also not the only crypto to invest in. There are a number of cryptocurrencies around today, and varying prices and levels of volatility, which allow new or established investors to dip their toe in the crypto pool before fully investing.
Within each sector you’re investing in, you also need diversity. Investing in multiple high-end properties is not diverse, but having a high-end property, an apartment or two, and a office/warehouse space is obviously more diverse.
This simple example is just used to illustrate that every investment has its ups and downs. There will be a time when big, fancy properties are wanted, but that could die quite quick and be stagnant for a while, and you don’t want to sit with a whole section of your portfolio not making you money.
Another thing to remember, and this will be obvious to any seasoned investor, is to always keep an eye on your portfolio and know when to either get out, or sometimes invest more. Leaving your portfolio to its own devices is a killer.
It is always necessary to know what is happening within your portfolio so nothing takes you by surprise. Yes, sometimes you can just leave it and it will do its own thing, but treat it like a plant, it doesn’t need 24 hour attention, but if you aren’t watering it, it will die.
What to Invest in
Now that we’ve discussed the how and the why, let’s go over some great investment opportunities. As mentioned already, stocks, real estate and bonds are great, but there are more that should grab your attention.
Marijuana is a growing industry, excuse the pun, especially since legalisation is becoming more common globally. It is an incredibly popular sector, and considering it is being used in more and more industries, it is definitely worth a look.
Biotechnology is another field to investigate. Scientists manipulate crops and living organisms to be used in industries such as healthcare, farming and many other environmental uses. The markets biotech is used in is growing, and investment opportunities are there.
Another huge sector to invest in is AI. AI is being used in and across so many industries nowadays, and the businesses doing the work and research are prime for investing. Tesla is the obvious choice, but there are many more.
As you can see, there are many ways to diversify your portfolio. There are also a number of things to remember before doing it. If you take your time, however, a diverse portfolio can lead to massive, long-term gains.
As long as you make smart decisions, and not get stuck in the trap of constantly finding “great opportunities”, and then end up getting bogged down, with all your money stuck in junk investments, you’ll end up doing very well for yourself.
To finish, always remember to do your research before investing, find out what other opportunities there are, weigh up the pros and cons, and get the advice and help from a professional before taking any giant leaps.