Diversification saves currency fluctuations
Diversify your portfolio for more riskless and worry less investing
10:05 19 July 2013
Investments can be of both short and long term returns instruments. This choice depends on the individual and his immediate need to make money. Any portfolio for that matter to bring huge returns is associated with risks. So the choice of making wise investments is by diversifying the cash in hand to different risk proportionate instruments.
Imagine of you planning for the future at the age of 40, the best way is to follow 80-20 rule wherein 80per cent is risk-free government investments and 20per cent for a high risk avenue.
When we talk about going beyond the norm, portfolio diversification comes in. When you invest, it is considered normal to put all your money in one investment (i.e. buying shares). But as experts would react, it is foolish to have only one investment.
It is better for you to divide your money to different investments (i.e., 25per cent for shares, 25per cent for time deposit, 25per cent for bonds, and even 25per cent for leisure spend). Why? So that when bad things happen to one investment, you will not be left with nothing. To further entice you to diversify, below are the advantages of having a diversified portfolio:
- Reduced risk - When your investments are diversified, you won’t suffer large losses when one investment doesn’t go well. Additionally, when one investment dives and skyrockets, you won’t suffer any loss at all.
- Diversified assets - When your holdings are diversified, you are left with different types assets for which exhibit dissimilar profitability and risk. Having dissimilar risk and profitability makes your holdings stable.
- Long Term - Unlike investing all your money on stocks which requires you to take a watchful eye of the market, a diversified portfolio allows you to sit back and have fewer worries. This is in connection with the reduced risk. Since the risk is low, your holdings can remain stable for extended periods.