Diversification

As a financial firm, we consider it our duty to educate the public on various topics. Today we would like to discuss the benefits of diversification in one’s investment portfolio.

But what is diversification?

Diversification is an investment strategy used to manage risk by having investment money spread across various investment vehicles. Such investment vehicles may include stocks, bonds, real estate, and cash alternatives. Please note, diversification does not guarantee a profit or protect against loss.

The main philosophy of diversification is as follows: don’t put all your eggs in one basket. You can spread the risk among investments, as well as over different industries—this can help offset a loss in any one investment.

Likewise, the power of diversification may help smooth your returns over time. For example, as one investment goes up, it covers for one that may be going down. This may allow you to ride out market fluctuations which is helpful for more steady performance under various economic conditions. Diversification can be very helpful as it can bring you more comfort as you invest.

For a modest initial investment, you can purchase shares in a diversified portfolio of securities. You have “built-in” diversification. Depending on the objectives of the fund, it may contain a variety of stocks, bonds, and cash vehicles, or a combination of them.

If you want to start with a more modest investment, a good start would be to purchase shares in a diversified portfolio of securities. With securities, you have “built-in” diversification. And depending on the objectives of the fund it may contain stocks, bonds, and cash vehicles, or a combination of them.

Whether you are investing in mutual funds or are putting together your own combination of stocks, bonds or other investments vehicles it is a good idea to keep in mind with the importance of diversifying. The value of stocks, bonds, and mutual funds, change along with market conditions. Shares when sold, may be worth more or less than their original cost.

If you are interested in starting your investment portfolio, you can start by reading this article on annuities here, or read up on mutual funds here. Or if you would like personalized attention, feel free to call our office at 201-342-3300. One of our associates will be happy to speak to you.