Whenever we talk about investments and portfolios, the usual areas of concern are where and how to invest safely? There is nothing called a safe investment, however there are ways of managing risk to achieve good returns. It depends on the investment vehicles you select.
When I say investment vehicles, I am not referring to just one investment category but different categories where you can spread your money and it will cater to your requirements of impressive profits.
Therefore diversifying your investment profile plays an important role in managing your risks.
Let us identify the various ways in which you can diversify your investments:
- Spread your finances: While buying investment vehicles, it is always advised to indulge into more than one category. You can buy stocks, mutual funds, insurance schemes, bonds, etc. Divide your money and spread it into the categories you want to invest in rather than putting a huge sum in just one category.
- Global investments: With the advent of the internet era, all the countries of the world have become one big platform, where all the different economic markets merge into one. This gives you ample opportunities to invest in schemes functional in a different country. So even if one country experiences recession in its financial market, the other economy might prove beneficial for you.
- Capitalize markets: It has been observed most of the times that small companies do better business than their larger counterparts. Therefore, you can always rely investing in small businesses. But make sure that you do thorough research on the company you want to invest.
- Investment companies: Investment objectives can be attained with the help of investment brokers or companies that guides you to attain your financial goals, studies the asset behavior when invested and thus supports you to realize your investment targets.
- Investment vehicles: Different investment instruments have different styles of approach. Some of them concentrate on growth (the risky instruments) and the others on value. Few instruments resolve to provide both growth and value to the investor such as equities. Investors usually are more inclined towards investing in vehicles catering to both growth and value and thus minimize their risks.
- Market trends: The economical output of a particular market is directly proportional to its government’s stability and financial resources. Thus, the developed economies provide less risky investment opportunities than the emerging economies.
- Investment returns: Are you looking for an investment instrument with 100% returns guarantee? No one can guarantee the full returns when you have invested in equities, or shares. You make outstanding profits if the financial market is showing a positive trend. Otherwise, you incur losses.
- Locking period: Ever invested in mutual funds? Agents would often advice you pay for say 10 years, they will also mention a locking or holding period of say, 5 years to incur good returns. This is a strategy investors usually take advantage of.
- Fixed- income funds: You can always rely on fixed income funds or bond funds (as they are commonly known) while planning the portfolio diversification. Thus, by adding these fixed income funds you secure your portfolio against any kind of market volatility.
- Earning commissions: Different brokerage firms charge you differently when you enrol with them to manage your investments. Some firms will charge you on a monthly basis, while others take a share on the transaction fees. You need to identify which one suits you and gives you a secured platform.
These are the 10 different ways or tips you can refer to while choosing to diversify your investments.