Is your investment portfolio dominated by a single class of asset? Make sure you are not putting all your eggs in one basket by diversifying your portfolio with the following assets:
Most investors hold assets in stocks. But investors who are just starting out may only hold assets in “safe” forms of investments like savings accounts or certificates of deposits. While low-risk investments are important, these generate very low yields. Newbie investors can, therefore, expand into cheap penny stocks for higher returns with lower capital.
Notably, stocks that cost less than $5 can be very risky. If you don’t do your research, you could end up holding a lot of worthless stock. Therefore, it’s recommended to invest in listed penny stocks and quickly trade them off. Holding cheap stocks in a limited and controlled manner can generate excellent yields in the short-term.
Bonds are a form of long-term investment that can generate interest payments semi-annually. Bonds are either issued by governments or companies. There are different types that can be included in your portfolio. Some bonds are secured with assets or guarantees. These bonds are excellent assets for long-term investment, such as for retirement funds.
Financial advisors strongly recommend new investors to diversify stock-dominated portfolios with bonds. Bonds generate better yields at lower risk. There is a high-risk category of bonds that generate higher yields as well. But for true diversification, purchase treasuries and securities from stable governments and reputed companies that have been in operation for a long time.
Precious metals like gold and silver don’t usually come to mind as great investment options. It’s important to understand that precious metals are not typical forms of investment assets. Unlike stocks and bonds, gold and silver won’t generate annual returns. Rather, precious metals act as a hedge against currency devaluation.
Precious metals are valued inversely proportional to currencies. That is to say, when the dollar goes down, the price of gold goes up. The real value of precious metals becomes only evident during financial crises. Think back to 2008. Most investors lost cash assets held in stocks and bonds during the Great Recession. But this period also saw gold prices soar. Investors who had precious metals assets managed to protect their portfolios against the worst of the recession.
Similarly, when the Sterling pound fell following Brexit, retirees with precious metals in their funds protected their wealth while those without any lost cash assets. Therefore, consider precious metals as a form of long-term investment against political and economic instability that can wipe out cash fortunes in minutes.
Having property investments means owning an asset that can be of immediate use and value in the wider world. While property values can be speculative on the stock market, owning property can generate returns in many ways. Real estate in desirable locales can generate passive income with leases and rent. Land, especially agricultural land, is one of the best assets any investor can own.
If you have considerable amounts of cash to spare, then consider investing in property. Even if the prices go down, real estate has inherent value that cannot be easily wiped out by speculators.
You can diversify your portfolio with any of the above assets. Keep in mind, however, that you are diversifying the right way. Don’t invest too much in an asset class you don’t understand. Always keep up with the news and continue to educate yourself on investment matters to minimize your exposure to risk.