Setting and maintaining strategic asset allocations play a very large part in long-term investment success. No matter how old one is or what goals they have, we believe that diversifying investment within different types of stocks, bonds, and other investments is a very strategic path towards achieving long-term investment success.
The goal of diversification is not to enhance the performance of one’s investments. It is not a guarantee that you will get profits or prevent losses. However, once you choose to target a level of risk, based on your goals and time horizon for the achievement of those goals, diversification may provide the potential to improve returns for that level of risk.
To diversify your investment portfolio, do intensive market research for companies whose returns haven’t historically moved in the same direction, and, ideally, assets whose returns move in the opposite direction. This way, all your portfolio will not decline at the same time in case of declining markets. In short, you will have the ability to counterbalance poor market conditions with good market conditions.
Building a well-diversified portfolio also involves trying to stay diversified within each type of investment. Inside your individual stock holdings, beware of over-concentration in one stock. It’s smart to diversify across stocks by market sectors, capitalization, and geography. Note that not all markets perform well at the same time, so you may be able to reduce portfolio risk by spreading your assets across markets. You may also want to consider a blend of styles, too, such as growth and value.
How to build a diversified portfolio
To start, you need to make sure your investment mix, for example short-term investments, bonds and stocks, is aligned to your investment time horizon, goals, financial needs, and similar factors. Keep in mind that different investment mixes have different risks and different returns potential. Talk to us today on 0719 071 999 or write to us on email@example.com get started.