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this is one of the most common phrase anyone will hear when going into investment.
This is the central thesis on which the concept of diversification lies.
It’s part of what’s called asset allocation, meaning how much of a portfolio is invested in various asset classes, or groups of similar investments.
Every level represent a different risk appetite, for the average joe in the street to seasoned investor to conglomerate, diversification will play an important role in the risks management.
Spreading the risks in the asset allocation, doing funds placement, geographic diversification to dollar cost averaging.
some argue that this may not bring out the maximum profit potentials, however, there are no certainties in the volatile market.
Maximum profit will exist in textbook and not in real market.
Recommending building a 80/20 portfolio, allocating 80% of capital to investments and 20% to cash.
With the cash allocation helps to play an advantage when coming to any downfall, by buying in at a lower price. This will help to boost the overall risk diversification.
When the market is booming, it seems almost impossible to sell a stock for any amount less than the price at which you bought it. However, since we can never be sure of what the market will do at any moment, we cannot forget the importance of a well-diversified portfolio in any market condition.
Funnel through the tools and strategies available will be a wise choice to do so.
Consider creating your own virtual mutual fund by investing in a handful of companies you know, trust and even use in your day-to-day life.
Add to your investments on a regular basis. If you have $10,000 to invest, use dollar-cost averaging. This approach is used to help smooth out the peaks and valleys created by market volatility. The idea behind this strategy is to cut down your investment risk by investing the same amount of money over a period of time.
With dollar-cost averaging, you invest money on a regular basis into a specified portfolio of securities. Using this strategy, you’ll buy more shares when prices are low, and fewer when prices are high.
Stay current with your investments and stay abreast of any changes in overall market conditions. You’ll want to know what is happening to the companies you invest in. By doing so, you’ll also be able to tell when it’s time to cut your losses, sell and move on to your next investment.
Practise Start-Pause-Stop-Switch with an objective oriented mindset.
Get Started with any form of investment that you are familiar with, learn to Pause to rethink and strategize, Stop when it’s enough and Switch to take advantage or avoid.
In corporate portfolio models, diversification is thought of as being vertical or horizontal.
Horizontal diversification is thought of as expanding acquiring similar asset class. Vertical diversification is buying in more to the same asset class.
Non-incremental diversification is a strategy should be followed by conglomerates. Company can attain diversification from exogenous risk factors to stabilize and provide opportunity for active management of diverse resources.