If you want to start investing, diversifying your investment portfolio is important.
There are different asset classes where one may invest their money for the purpose of diversification. The logic behind diversification is very simple, yet highly potent to be effective.
Each asset class behaves a little or very differently at different times. For example, it is believed that when the stock market goes under a sharp correction, the prices of gold rise. Hence having gold in one’s portfolio could hedge against a sharp decline in equity investment.
This post tells you about 5 ways to diversify your investment portfolio. Read on!
An investment portfolio is like a detailed statement of all your investments. A diversified investment portfolio has debt assets like FD, bonds, etc. along with equity assets like stocks, mutual funds, etc. You are also free to include more types of assets in your portfolio such as cryptocurrency, real estate, land, gold, etc. But what is investment portfolio diversification? Scroll down to find out.
It is the famous proverb of ‘not keeping all the eggs in the same basket’. Different asset classes have their own pros and cons, highs and lows. Hence to safeguard their overall portfolio, one should be investing in different types of assets, so that their invested money could grow without a drastic failure or low. For example, Gold is considered a good hedge against equity stocks, because when the equity market falls, gold prices rise. Hence having gold in one’s portfolio could help to increase the stability of the overall portfolio.
If you are new to investing and want to learn how to diversify your investment portfolio, take a look at the following section.
As non-traditional investments are very lucrative due to their huge reports of giving extraordinary returns in a short span, people tend to invest all the money they have, ignoring the risks associated with this investment. Hence, only invest the money in non-traditional asset classes, which you could ‘afford’ to lose.
Planning to invest is a great way to grow your wealth. However, it is also important to diversify your investment portfolio. Investing in various sections like mutual funds, bonds, real estate, etc. will keep your money safe and cushioned. Now that you know how to diversify your investments, go ahead and invest!
Ans: An investment portfolio is like a detailed statement of all your investments.
This article is solely for educational purposes. Navi doesn't take any responsibility for the information or claims made in the blog.
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