Give Yourself Added Financial Protection Through Diversification
Did you know there’s an investment fund that only invests in bourbon? Talk about only having one “shot” at success. If you’re looking to potentially lower risk, consider diversifying your portfolio across a range of investments.
One of the secrets of diversification is spreading out your assets in different sectors.
For instance, you may own large-cap U.S. stocks and balance it out with mid-cap international stocks. You can also further diversify your stock holdings with bond investments and absolute return funds. The amount of diversification you choose can depend on several factors, such as:
Investment Goals – Are you looking to grow your nest egg, or maintain the balance?
Risk Tolerance – Do you want to invest aggressively, or prefer a more conservative approach?
Timeframe – Look at how many years you have to reach your goal. Do you want to retire in 3-5 years, or are you saving up to put your child through college in 18 years?
Diversification doesn’t mean you can just put your portfolio on cruise control.
You should still keep an eye on the overall market and the industries and funds you’re invested in. For instance, if you’re invested in an Asia Pacific fund and there’s unrest in that region of the world, consider shifting your international investments to a more stable area.
No investments are immune to market volatility, but diversification is one way you can spread out the risk. Consider speaking to a financial planner if you’d like some guidance on how to put more diversification in your portfolio.