It’s said that investing is a good idea, but diversifying that portfolio is even better – it’s that whole proverbial eggs in many baskets as opposed to one basket thing. But not really sure what the benefit of a diversified investment strategy is? Here are three of the reasons why we think it’s important:
You don’t put all your money in one place
In terms of an investment strategy, this is that whole you don’t want to put all your eggs in one basket idea. If you do, you run the risk of losing everything you have. If something bad happens to the investment you put all your money into, it’s not going to be good for you. By spreading your money over numerous investments of varying risk profiles, you are balancing the risk associated with those investments with the rewards you can get from it. In essence, it allows you to control the risk. Keep in mind that there is a small chance that you can suffer losses in all your investments at the same time, if everything goes down (as some people experienced in 2008). It doesn’t mean you can’t lose, a diversified strategy just improves your chances in the investment playing field.
It opens up opportunities
A more positive outlook on a diversified investment strategy is that it opens up so many opportunities and it might just place you in the right place at the right time. If you are only investing in things that are ‘safe’, familiar or that you are sure will do well, you actually close yourself off to a lot of opportunities. And in fact, it just might be the investments that you don’t think will do well, that actually do. We are by no means encouraging investing in things that you think will definitely lose you money, but perhaps be a little more open to some of the different investment opportunities you might have been closed to before you decided to diversify your investment strategy.
It leads to higher returns and lower risk (generally)
When it comes to your investment strategy, you can’t glean high returns without taking some risk. If you are okay with not earning high returns, then low-risk investments are perfect for you. In an ideal world, we would all be earning high returns by taking very little risk, but that’s unfortunately not possible. However, diversifying your investment strategy means that you can manage that risk, which means that you can better balance your reward versus your risk.
Here are some of the investment options to look at for a diverse investment strategy:
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Stocks (domestic and international)
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Bonds
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Mutual funds
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Property
If you are looking for an incredible investment to diversify your portfolio, then we highly recommend foreign property investment in a place that is guaranteed to have visitors year-round. One such destination is Calpe, along the Costa Blanca in Spain. Contact us to find out more about investing in Spain, or to take a look at our amazing apartments in Calpe – the ideal investment choice.
