Diversification is key to managing investment risk. If you are looking for long-term growth, you cannot afford to put all your eggs in one basket.

A diversified portfolio is a stable portfolio. It always pays to always look for new investment opportunities to diversify your portfolio, but how do you go about it without increasing risk?

Read on to find out how to diversify your portfolio.

 

Spreading Out

Having a diverse portfolio might not be the most efficient method to increase your wealth, but it is the only way to do it without excessive risk. If you place all your money in one sector, or worse, in a single stock, you are shouldering extreme risk.

When spreading out your wealth, you invest in a number of companies and commodities you trust. That way, if one company takes a dip, the rest of your assets will be unaffected. The more global investments you make, the less your risk will become in the long run.

Holding an international diversified portfolio will help you weather market downturns that would ruin more limited portfolios.

 

ETFs and REITs

You can further diversify your portfolio by investing in exchange-traded funds (ETFs), and real estate investment trusts (REITs). While these do not yield impressive returns, they can be remarkably stable and perform well in the long term.

The same holds true for index funds and fixed-income funds. The more long-term investments you hold, the better protected you are against volatility.

A portfolio that relies at least partially on ETFs will grant you a degree of protection against market disruptions. ETFs are also an excellent investment opportunity for early startup capital you might wish to reinvest without risk. While this will slow your growth, it will give you long-term stability.

 

Expand Your Portfolio with Dollar-Cost Averaging

You should add to your portfolio as you grow your wealth. By dollar-cost averaging (DCA), you can even out the effects of market volatility and make sure your risk remains low. If you keep investing the same amount of money on a regular basis, you will end up buying more shares at low prices.

 

Automate Your Investments

Dollar-cost averaging and other calculations may end up taking more and more time as you grow your wealth. That is why you should consider automating your routine tasks through virtual trading. For a thorough look into some of the most efficient virtual trading platforms, check out this tastyworks vs thinkorswim analysis.

 

Tracking Commissions

Keep in mind that the more you diversify, the higher commissions you will end up paying. You will need to track monthly fees and transactional fees to ensure you are not bleeding money to unnecessary commissions.

 

Consolidating and Getting Out

Finally, you should always remember to consolidate when the time is right. Automation may allow you to invest on autopilot, but you should take the helm to sell your assets from time to time. That way, you can reinvest your money with efficiency.

 

Diversify Your Portfolio and Track Your Visitors

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