(MoneyHippo.com) – All the financial advice you ever received likely encouraged you to save money, whether for retirement, an emergency, or a rainy day. But sticking that money in a savings account won’t net you very much over the short or long haul, so what do you do? You need an investment strategy. The bottom line is that you want your funds to grow steadily and protect them as much as possible from dips in the financial market. A great way to do that is through diversification. This approach has you put your money in various types of investment vehicles so that when one part of the portfolio dips, the other parts keep the balance at least steady. At least, that’s the hope. Here are some strategies to consider.
- Asset classes in the stock market: This strategy involves choosing different companies within a sector — let’s say healthcare — to grow wealth. Although diversification within that industry is important, you want to select multiple sectors. By having more than one industry in your portfolio, you still have other regions that could excel if healthcare suffers for a time.
- Beyond stocks: Diversifying money in the stock market is a great way to reach your investment goals, but you’re still only putting your money in one place. To spread out the risk and maximize returns, consider adding other investments like commodities, bonds, and real estate. This strategy adds another layer of diversification that could enhance and protect your portfolio.
- Here and there: Another technique you could try is expanding beyond domestic investment and adding foreign companies to your assets. For instance, if you invested in all US companies, and the economy takes a dip, so does your portfolio. But if you also had emerging markets, European picks, or Asian businesses to round out the investments, that might minimize the hit to your overall wealth.
When considering an investment strategy with your eye on diversification, you want to evaluate goals, age, and timeframe to get the most out of your money. Financial professionals can take your ideas and help you develop a viable plan.
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