The investment portfolio, also known as the securities or portfolio portfolio, is the set of financial assets that belong to an individual or an entity, in which a basket of financial assets is deposited in order to generate a surplus value. Therefore, it is quite common for people to seek to diversify their portfolios in order to create a much more balanced risk profile.
Why is it important to diversify your investment portfolio?
The main reason to diversify the investment portfolio is to improve risk -adjusted profitability. That is, this action allows us to reduce the risk that an individual takes to obtain a benefit for the credit he uses to invest, although, it is very likely that you need to spend a greater figure than you think to achieve this.
If you do not understand how it works, having a variety in the assets in which it is invested, when an economic recession happens, you make sure that some of the positions of your assets improve while others have a negative performance, so that you never end up in loss. Although, this is not something insured, the more diversified your wallet is, higher are these probabilities.
Of course, even if the diversification of your investment portfolio increases the long -term growth potential, this brings, as a consequence, that short -term profits are reduced, which would bring several problems if you try to save part of your income. Likewise, this requires regular supervision to better manage the movements of your portfolio, so it is not a decision that must be made without thinking.
How is an investment portfolio diversified?
The way to diversify an investment portfolio is to divide the capital of which is available between long -term and other short -term investments, so there are different ways to make this variation in investments, then we will mention some of the most prominent:
- Going to other markets: normally, people interested in investing choose to go to their national or local market for the trust they generate, but, opting for markets from other countries is something that can be much more useful for diversification, since we not only depend on the inflation of a country to generate profits, but would take advantage of the economy of other sectors. Therefore, you can search in specialized portals for this.
- Using quoted funds (ETF): taking advantage of quoted funds is a practice that has been popularized a lot for investors around the world, since only buying an action can obtain participations in large baskets that generate great benefits.
- Combining different sectors: the point of diversifying does not imply investing in different companies without knowing their sector, but varying in all the senses. That is, if you want to spend spending on a company, be sure to know what your economy is based, to have your money in different sectors.