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How to Build a Diverse Investment Portfolio in Three Simple Steps

For the entrepreneur, investing is an enticing prospect. Most business people have a natural affinity for risk-taking; after all, making big decisions is an important part of your professional life, and if you’re not bold enough to commit to putting your money on the line, then your chances of success are non-existent.

Building an investment portfolio

You understand the principle of speculating to accumulate, and this makes you ideally suited to the Russian roulette of investing, yet it should be noted that trading the financial markets is not entirely a game of luck. There are clues there for those who take the time to uncover them, and stratagems to safeguard your wealth and future successes. One of the most important of these is diversification.

Diversification is, quite simply, the art of spreading your wealth across a variety of investments. The more diverse your portfolio becomes, the better you guard yourself against misfortune. Thus, should disaster strike one market, the impact on your portfolio is cushioned by the continued positive or neutral performance of your other assets.

But how do you go about properly diversifying your investment portfolio? If you need a hand working it out, here are three top tips to help you get started…

Top Tip #1: Stick with What You Know

Although diversification refers simply to spreading your wealth around, as a tool it is generally used to stabilise a portfolio, and this means actively trying to create a safety net around your assets. One of the best ways to do this is by investing in companies that you know, trust, and would (or do) use yourself. Although many of these may be retail-oriented, having a real world understanding of how a company is performing is a huge help in unpicking its market activity, and also foretelling its probable future performance. You can also try using platforms for beginner investors like Betterment – It helps you manage your personal finances better, as well as building your portfolio while keeping your risks low.

Top Tip #2: Invest in Precious Metals

Gold bar

Our second tip is a little more specific. One of the best ways to protect your portfolio is by investing in gold and silver with the help of a service like BullionVault. Valued by humankind since time immemorial, gold and other precious metals have always been esteemed by cultures across the globe, and the demand for them is unceasing. As a result, precious metal is widely considered a safe haven investment, tending to stoically hold its value even when the rest of the markets have been turned upside down. If you need an asset that will really maintain its worth, then this precious metal is the perfect choice for you.

Top Tip #3: Consider Index or Bond Funds

Finally, another fantastic choice for those looking to diversify is the addition of index or fixed-income funds. These securities track various indexes, and they make a wonderful long-term tool for balancing the risk levels of your assets. Ideal for hedging high-risk portfolios against the perils of market volatility and uncertainty, they’re reliable, almost unshakeable, and might just be ideal for you.

Takeaway

Investing is actually a simple activity.  Investors and brokers are often the ones who make it complex.  With that said, you need to well-educate yourself with the right resources.  The key in building your investment porfolio is patience – don’t rush things.

Don your investment armour today and diversify your portfolio with these three top tips.

About author

Ivan Widjaya
Ivan Widjaya 2367 posts

Ivan Widjaya is the Owner/Editor of Noobpreneur.com, as well as several other blogs. He is a business blogger, web publisher and content marketer for SMEs.

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