Make sure that you are not a fool but a wise investor by diversification of investment

Experienced investment experts often recommend diversifying investments for investors, especially novice investors. Because it is important to diversify investments in order to minimize investment losses.

Investment diversification is the most powerful weapon in maximizing profits and minimizing the risk of loss. But, most people still don’t know, what is investment diversification, and how to optimize it?

Investment diversification is a way to place funds in various investment instruments to reduce the risk of loss. Of course, everyone wants to make big profits when investing, but it often happens that when an investor finds an investment instrument profitable, he then puts all his money there. Don’t be like that.

Why should you diversify your investment?

You must have often heard the term “Don’t put all your eggs in one basket “. This is the easiest analogy to diversify investments. The term is defined as “Do not allocate all assets in one investment instrument.”

Investment diversification is very important, because if one investment instrument falls and suffers a loss, then there are other investments that can support it. So, your money will not run out and there will be no leftover due to one loss, and you will still benefit from other investment instruments.

How to do it?

Determine the ratio for each investment

Determine the ratio of each investment instrument you have in your portfolio after determining the investment product. An investment portfolio can be said to be effective if it contains a combination of various types of assets.

The technique of combining various types of assets in your investment portfolio will increase the profits obtained, and at the same time minimize risk.

An example of investment diversification for beginners, for example, is that the asset allocation ratio in your investment portfolio is 100%. Don’t just put everything in stocks or mutual funds.

You can divide it into 40% stocks, 10% gold bonds, 10% insurance, 20% real estate, and 20% mutual funds. This allocation may vary according to conditions and risk profiles.

Differentiate each investment instrument you choose

The next way is to differentiate the investment instrument you choose. For example, if you invest in mutual funds, spread your money across various mutual fund products, such as stocks, money markets, and bonds.

One tip that can be applied is to choose investments with different rates of return. However, it should be noted that a high return also carries a high risk.

In addition, choose investments in different sectors. For example, when investing in stocks, choose stocks with different industries. Don’t just have shares in the banking industry, but try to have other shares in the manufacturing industry or maybe FMCG.

Regularly rearrange portfolio

To run smoothly, try regularly to check the diversification of your investment portfolio. Because diversifying investments can not only be done once.

For example, when you know that the price of a stock is going down. Allocate a lot of funds to buy it. In addition, when your short-term investment goals have been achieved, you can channel the allocation of funds to other places for long-term investments.

It doesn’t matter if your investment time horizon is long or short, or your goal of investment is to earn high profits at once or get regular income from the investment made, diversification is a tool that will help you fulfill all your dreams of making your money work for you in the best way possible.

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