We’ve all heard the saying, “Don’t put all your eggs in one basket.” This is especially true when it comes to investing. Putting all of your investments into a single asset class is risky because if that investment performs poorly, you could lose a lot of money. However, by diversifying your portfolio, you spread out your risks so that if one type of investment experiences a loss, others may perform better and compensate for the losses.
The first step in creating a diversified portfolio is determining your investment goals, risk tolerance and financial means. Taking this information into account, you can then decide which investments are best for you and your goals.
There are several different types of assets that can be diversified in an investment portfolio, including stocks, bonds, property and cash equivalents such as money market accounts. Each of these investments has its own advantages and disadvantages. For example, stocks can provide more potential for growth but can also be more volatile than other assets. Bonds, on the other hand, have lower volatility but often offer less potential for growth.
To further diversify your portfolio, consider the economic conditions in which you intend to invest. Analyze projections and trends to determine which industries, companies, or geographic areas are likely to experience growth versus decline1. This will help you tilt your portfolio towards those assets with the greatest upside potential and can significantly impact your overall return and stability.
Aside from the type of investments you select, it’s important to diversify your assets within each investment category as well. For example, if you are invested in stocks, try to diversify between domestic and international companies, large-cap and small-cap firms, and even high-yield and investment-grade bonds. In addition, if you invest in real estate, be sure to spread it out amongst different types of properties and even between rental and owner-occupied units.
When it comes to your IRA, adding alternative investments such as silver can be a powerful way to further diversify your retirement savings. However, before adding a precious metal to your IRA, it’s important to shop around for the best price and account fees. It’s also vital that any silver you purchase meets IRS purity standards of 99.9%, as this is necessary to maintain tax-deferred status.
Whether you’re considering a Silver IRA for the first time, or are looking to diversify your current retirement savings into a precious metals-based investment, it’s important to find a trusted IRA company that offers a wide selection of IRA-approved silver products. Freedom Gold USA, located in Ohio, is a leading silver IRA investing company in Columbus, and provides a one-stop-shop for all your IRA-approved silver needs.
No matter how many assets you have in your portfolio, it’s important to diversify your investments. The above examples are just a few ways you can do this, and a financial professional can assist you in determining the best strategy for your unique situation. In addition, it’s important to revisit your investment mix on an annual basis to ensure that it continues to align with your financial goals and time horizon.