HOW TO PROPERLY DIVERSIFY AN INVESTMENT PORTFOLIO

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One of the most common questions that savers can ask themselves is where they have the possibility of finding a single investment product to put their capital and obtain a high return . However, the results always show that putting the eggs in the same basket considerably increases the risks, which can cause losses or lower returns on our money.

One of the most common questions that savers can ask themselves is where they have the possibility of finding a single investment product to put their capital and obtain a high return . However, the results always show that putting the eggs in the same basket considerably increases the risks, which can cause losses or lower returns on our money.

Among the first lessons learned when investing highlights the need to diversify as much as possible. That is, following the example above, do not put all your eggs in the same basket. Therefore, an alternative is to invest in more than one security in the markets or, even better, in vehicles that already have an intrinsic diversification, such as mutual funds .

These types of financial products can be one of the best options to invest . The funds are managed by professionals who invest in baskets of assets depending on their goals. And it is that they can buy stocks, raw materials, bonds and even other funds to configure their portfolio.

For this, it is recommended that you understand what you are investing in. As Warren Buffett, one of the most prominent and recognized investors on Wall Street, says, he does not invest in businesses he does not know. Therefore, when composing the portfolio, this maxim must always be applied. If you do not understand where the profitability comes from, it is better not to invest in any asset.

In addition, it is important to be selective and patient to carry out adequate diversification. It’s about being disciplined when choosing investments. The portfolio building process and execution by investors should be consistent and focus on long-term goals , regardless of daily market fluctuations.

Many experts always warn that, when investing, you have to be very selective first with the countries, but above all with the companies, either via equities or fixed income.

An example could be taken by looking at the Ibex 35, in which the banking sector has a significant weight that translates into greater volatility in investments: when the context is bullish, the Spanish index rises more than its counterparts and, at the same time On the contrary, it has more losses in contexts of greater selling pressure.

Thus, there are many types of funds and all are diversified to a greater or lesser extent. It is one of the best options for proper risk management since, no matter how global the vehicle may be, it will never be able to cover all sectors and geographical areas.

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