As the saying goes, don’t put all your eggs in one basket. This applies not only to the amount invested, but also to the type of investment. Many investors succeed by building a widely diverse portfolio, and you should be no exception.
Research shows that investors with a diversified portfolio typically get more stable returns than those who invest in just one thing. By investing in several different markets, you actually have a lower risk.
For example, if you buy only one stock, you may lose all your money when that stock falls sharply. But if you invest in a few or more different stocks, most of which are doing well and only a few are plummeting, you’ll still be in good shape.
Good diversification spreads investment risk, but this will take time maybe. Because of initial capital limitations, you may have to start with one type of investment and invest in other areas over time. This is possible. But if your initial investments are well funded, it is better to allocate them to various types of investments. And you will find that you have less risk of losing money and will see better returns in the future.
In addition, experts advise you to divide your investment funds equally among your investments. For example, if you start with $50,000, you could put $12,500 in an interest-bearing savings account, $12,500 in stocks, $12,500 in bonds, and $12,500 in real estate.
The equal distribution of investment helps to spread the risk. When one investment is in trouble, other investments may remain stable or even grow substantially. So you don’t lose all your investment.
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