Epic Diversification

Hola bellas!  Why is diversification so important?  Well, have you ever put all your eggs in one basket? You’ve probably have found out, through life experience, that this isn’t the smartest thing to do.  When you put all your resources in one place (the opposite of diversification), you could lose everything, if an unexpected event happens.  This also applies to investments.  For example, if you invest all your money in one stock or company, if that company losses value, you would lose a lot of money from that investment.  No one wants to lose their hard-earned money on investments!  The whole purpose of investing is to make your money grow and not make it disappear!

When it comes to investing, it is advised that you diversify by having a variety of different kinds of assets within your portfolio.  For example, some of the different assets that you could include in your portfolio could include stocks, mutual funds, exchange- traded funds (ETFs), certificate of deposit (CD), and bonds.  This way, if a stock you own goes down in price, you can have other investments that are doing well, and balance out the loss.  Even within investments, it is advised that you diversify further.  For instance, by buying stocks from various different sectors.

By diversifying your investments, you can reduce your risk and maximize your return.  If you want to diversify your portfolio, but are not sure how to get started, you can buy mutual funds and ETFs.  Mutual funds pool money from different investors and invest it across different companies.  ETFs are a pool of securities that can be purchased through a brokerage firm.  The difference between ETFs and mutual funds is that ETFs can be bought and sold throughout the day, just like stocks.  By applying these concepts into your daily life, you can make your money grow, while not risking it all!  Who doesn’t want that?

Sources:

https://www.investopedia.com/terms/d/diversification.asp

Related Stories

Discover

The Awesome Time Value of Money

Hola bellas! Have you ever heard that a dollar today is worth more than...

The Importance of Emergency Funds

Hola bellas! As you know, life can be very unpredictable. Everything’s going dandy one...

10 Easy Ways to Save Money

Skip out on the coffee run once or twice a week You can save a...

How to be Financially Savvy During Hard Times

Hola bellas! In life, we go through good times and bad times. When we’re...

The Most Popular Types of Bank Accounts

Hola bellas! Did you know that there are different types of bank accounts? Some...

Learn How to Invest with Custodial Accounts Now

You’re super inspired and want to start investing ASAP, but if you’re underage, you...

Popular Categories

Comments

LEAVE A REPLY

Please enter your comment!
Please enter your name here