10 Tips To Diversify Your Investment Portfolio

“How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.” Robert G. Allen

When you have some savings, it is good to invest and allocate your money to work. Most importantly, you need to diversify your investment portfolio. Keeping too much of your money in your checking account is too tempting to spend and counterproductive.

The best time to begin investing is now—the earlier in your life, the better your wealth accumulation.

You should distribute your money among different assets based on your age and lifestyle. You can afford more risk in your portfolio at a younger age and be aggressive with more growth, such as stocks, than someone closer to retirement age.

#1 Asset Allocation

Don’t put all of your eggs in one basket. Instead, you should be distributing your money among various classes of securities using an appropriate allocation. You should diversify within each security class. Investing in 10 energy stocks is not diverse.

#2 Diversification Is A Must

Stocks provide more growth, appreciating faster than other financial instruments over the longer term. However, the stock market can be volatile, as witnessed by the 57% decline during the Great Recession.

# 3 Growth Stocks

Investors can easily convert money market securities into cash without loss of value. They are low-risk low return instruments with liquidity, stability and provide access to money. Treasury bills rated AAA are the closest thing to risk-free securities.

#4 Money Market Securities for Cash

Investing in bonds is desirable for more predictable income streams. It is desirable to invest in various bonds: treasury bonds, municipal bonds, and corporate bonds. These all differ in terms of credit risk, liquidity, and tax benefits.

#5 Bonds With Different Characteristics

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