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Diversified Investing

What You Need to Know about Diversified Investments 

You probably already know that it’s not smart to invest in only one type of stock, because it’s simply too risky to put all your eggs in one basket. If the stock drops in value or performs badly, you can lose your principal investment and any chance of building wealth. Diversified investments help you mitigate that risk. Our team of financial advisors is here to help you diversify your investments so you can pursue your financial goals.

<span style="font-weight: 400;" data-mce-style="font-weight: 400;">What Are Diversified Investments?</span>

What Are Diversified Investments?

Diversification includes investing in a wide variety of assets within an investment portfolio, such as stocks, bonds, mutual funds, ETFs, and options. You can also diversify your assets by utilizing other investments, which may include real estate, commodities, cryptocurrency, hedge funds, or tangible assets. The goal of diversification is to spread your risk and increase your chances of earning stable, healthy returns on your investments. 

<span style="font-weight: 400;" data-mce-style="font-weight: 400;">Examples of Diversified Investments</span>

Examples of Diversified Investments

There are many options for investments in your portfolio, although you may have some limitations inside of a 401(k). IRAs and private brokerage accounts offer more freedom for asset selection. For example, you may invest in some of the following asset classes: 

  • stocks
  • bonds
  • exchange-traded funds
  • cash and cash equivalents
  • commodities

Investing in different asset classes mitigates investment risk, but you also want to diversify your investment holdings across different industries and sectors. Our investment advisors can help you understand the correlation of your different assets to make sure your portfolio is truly diversified. 

Finally, our investment professionals differentiate between growth and value stocks. This has to do with the different lifecycle stages of the company you’re investing in. A new company or a company that’s expanding will sell growth stock, which should appreciate in value. Investing in value stock means you’re purchasing stock from an established company that may pay dividends and return a regular return. Diversifying in both growth and value stock helps you mitigate risks and create more stable portfolio returns.

<span style="font-weight: 400;" data-mce-style="font-weight: 400;">Other Investment Considerations</span>

Other Investment Considerations

To create a diversified portfolio, you must also consider your personal risk tolerance and your timeframe. A young investor who has more time may set up a portfolio skewed towards a higher risk tolerance, while a person nearing retirement may prefer safe and stable investments. Our financial advisors will create a portfolio based on your personal requirements and preferences.

Diversification is important for every investor. You don’t want to risk all of your wealth by betting on one stock or company to appreciate. Similarly, it’s not a bad idea to consider investing some of your money in assets that are not correlated to the stock market performance to further spread your risk and protect yourself against inflation. Examples of alternative investments include real estate and commodities.

FAQs about Diversified Investments

How Can I Ensure Diversification in My Portfolio?

There are different options for ensuring proper diversification in your investment portfolio. Our financial professionals can create and manage your portfolio for you and ensure proper diversification to meet your unique needs. You can also use exchange-traded funds to invest in multiple investments at once and reduce your investment risk.

Why Is Diversification Important?

Diversification reduces your investment risk. By diversifying your investments, you protect yourself from being tied to the performance of any particular asset. This means your portfolio can better withstand losses and provide you with healthy overall investment returns. 

Which Diversified Investments Should I Add to My Portfolio?

Which investments you should add to your portfolio depends on what you’re currently invested in. Our financial advisors can conduct a portfolio review and recommend balancing your portfolio to reduce your investment risk. For example, if you’re investing primarily in growth stocks, we may recommend adding value stocks. If you’re investing in one particular industry or company, we’ll recommend spreading your investments to diversify your wealth. 

Call Us for Advice on Your Diversified Investments

Our financial professionals understand the importance of diversifying your investments. We want to help you pursue your financial goals and set you up for future success. This involves reviewing your portfolio and adjusting your investment holdings to reduce your risk. Get in touch with one of our experienced financial advisors today to talk about diversified investments and how they affect your wealth-building goals.

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Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation

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