5 easy tips for diversifying your investments

Diversification has been a puzzle for many financial planners, investors and fund managers alike.  When the market booms, it seems impossible to many people to sell a stock for less than the price they bought it. When the indexes are going up, it might seem foolish to invest in anything other than equities. But since we can never be sure of what the market will do any time from now, we cannot ignore the importance of a well-diversified portfolio.

An Important Lesson on Diversification

We can remember the reactions of most investors when the markets began to stumble back in the ‘90s and in year 2007.  Many investors reacted fast but unfortunately, 80% of the damage had already occurred. Diversification is not a new concept today. We should always bear in mind that diversification is an art.

The time to practice disciplined investing with a diversified portfolio is a necessity for you to succeed in this sector, and help you weather most storms in the market. Here are five easy tips to for you to consider:

-Spread your wealth

Honestly, equities are good, but do not put all your investment in one sector or stock. Take your time to create your virtual mutual fund through investing in different organizations that you know, trust and maybe use in your day to day activities. Knowing an organization and using its services is a healthy approach in this sector.

-Consider index funds and precious metals

Adding index funds to the mix is a great way to diversify your portfolio. Index funds create a wonderful and long-term diversification. It ensures you hedge your portfolio against market uncertainty and volatility just like precious metals. Precious metals such as gold act as a storage of wealth and are reliable. Gold is important today as it was one thousand years ago.

-Keep on keeping on

Keep building your investments regularly. Invest your money in a specified portfolio that has been performing well in the market for a period of time. It takes time before receiving the rewards of your investment. Be patient.

-Know when to walk away

Buying and holding are sound strategies to most investors around the world. Just because these strategies have worked in the past does not mean you should ignore the forces at work. Always ensure you are in tune with the current market conditions and your investment. A good investor knows when to hold and when to walk away.

-Calculate your commissions

If you do not love trading, understand what you are getting yourself into and the fees you will have to pay. Most organizations charge on a transactional, monthly or annual basis. Understand what you are paying and what you are getting in return. Keep in mind that the cheapest choice is not always the best.  

Investing should be fun, rewarding and informative. Doing your research and exercising discipline when diversifying will ensure you get rewarded even in the worst times.