About 58% of Americans currently own stocks, and that doesn’t account for other investments like real estate and crypto.
If you’re an investor looking to diversify your investment portfolio, you likely are wondering where to start. Read on to get some ideas on what to invest in to decrease your risk and make the most money.
Examine Your Current Investment Portfolio
Before you can diversify portfolio assets, you will need to look at your current investments. Determine which are performing best and which are not currently performing well. This will help you decide what industries and markets will generate the greatest payoff.
You also will be able to see your current risk level. This is the first step toward diversifying investment portfolio assets to decrease risk.
Research Long-Term Market Success
Some markets like Bitcoin and cryptocurrency are extremely volatile. These investments may have short-term dips that look like investment failures. However, they’re actually projected to grow a lot in the long term with an annual growth rate of 12.2%.
Make sure that you research the long-term impacts of investments. Don’t just sell because something is at a current low.
Consider Real Estate
Real estate investing during recession periods is never a bad idea. You can flip houses or rent out properties to tenants. Recent data shows that real estate usually outperforms other investments, especially condos worth over $2 million.
Create Goals and Assess Your Ideal Risk Level
As with any important task, diversifying your portfolio requires you to set realistic and quantifiable goals. You can create a tailored investment plan with these objectives. Define your time frame and overall risk tolerance.
You then will have the chance to choose a mix of investments at an appropriate risk level. If you have time to ride the waves of a market, a riskier investment may ultimately pay off. However, if you need money in the next few years or are anxious about losing money to volatile markets, try to invest in lower-risk markets.
Manage Your Plan Over Time
No investment plan can remain stagnant over the course of several years. Market trends are always changing, so you’ll need to perform frequent portfolio maintenance. Semi-annual maintenance is the least you can do.
Monitor your investments to see how you can change your strategy. Once you determine how you can keep consistent risk levels, you can then rebalance. This is especially necessary if your portfolio strays from your target by 10% or higher.
Make sure that you refresh your portfolio at least once a year. If your financial situation changes, you also are going to need to revisit your plan. This ensures that your investment portfolio always makes sense.
Get Started With Diversification
Now that you know how to diversify your investment portfolio, it’s time to get started. Check out the “invest” section under the “business” tab on our home page for more information about making the best investments. You may also be interested in clicking the magnifying glass and searching for topics if you’re looking for something specific.
