To Top

A Diversified Portfolio is a Strong Portfolio- Here are Three Key Tips to Help You Build One!

When you first enter the world of investment, and even years into it, you will keep on hearing the same thing over and over again: a diversified portfolio is your one-way ticket to minimized losses and long-term gains.

No one ever touches upon the legwork that goes into building such a portfolio, neither do they offer tips on the best stocks to go for. One thing is for sure, however – if you plan on assembling your portfolio from individual stocks, you’d have to put in a whole lot of research.

But, who has time for all that? With the hustle-bustle of everyday life, being able to take time out to pursue the stock market is a luxury in itself.

Deposit Photos | Diversification is the best method of making your investments risk-free

Therefore, we have come with some simple alternatives for diversifying your stocks, without having to put in all that extra time and energy.

Let’s get right into it.

1. Look into Index Funds

The primary purpose of Index Funds is to mimic the performance of the index that they are tied to. For instance, if you were to buy an S&P500 index fund, you can expect it to mimic the performance of that index.

The biggest benefit of this method is that you’ll be saved the extra legwork of guessing and research, while instantly being able to have a diversified portfolio. If that wasn’t enough, you’ll be glad to know that the fee for index funds is super low as well, because you don’t require the services of a funds manager who’d have to hand-select the stocks for you.

Deposit Photos | Mutual funds managers usually have a high fee

2. Look into Actively Managed Mutual Funds

In this method, you’d be going an entirely different way from index funds, because mutual funds have pretty lofty goals, in that they try to outperform the market. So, needless to say, with those fund managers analyzing the market and investment choices all day every day, you’d have to pay a much more hefty fee, sometimes even up to 10 times more than you would for an index fund.

While this might be an amazing way to diversify your stocks, keep in mind that such managed funds miss their marks consistently, which makes their stable and results-ensuring counterpart a much safer bet.

3. Look into Real Estate

Stocks aren’t the only form of investment that can lead to high returns in the long-term; the real estate market is just as lucrative and solid. For most people, the first thing that comes to mind when they hear the words ‘real estate investment’ is that flipping houses or becoming a landlord isn’t their scene. And that’s fine.

That’s exactly where REITs come in. The way you’d buy individual stocks, REIT shares are available for purchase, as well. And, they pay dividends, too, just like the stock market!

Deposit Photos | Real estate is a very profitable source of investment

The Bottom Line

At the end of the day, the choice is yours. While the above-mentioned strategies are beneficial alternatives to your diversification problems, we can’t understate the importance of owning individual stocks, too.

While some investors may do fine owning a dozen or so stocks, others aren’t satisfied until they purchase about 40 and above. The key here is to always have a little bit of YOU in whatever option you lean towards. You can’t create the portfolio you desire without putting in a little research.

More in Investments & Savings

You must be logged in to post a comment Login