If you're considering investing, it's important to understand the role that diversification plays in risk management. Diversification is key to building a successful investment portfolio, and can help protect you against market volatility.
When selecting investments, it's important to choose securities that don't all move in correlation with each other. This way, even if one investment performs poorly, others in your portfolio may offset those losses.
Asset Categories
When it comes to investing your hard-earned money, there's no one-size-fits-all approach. That's where asset allocation comes in. This is the practice of dividing up your investment capital among different asset categories, such as stocks, bonds and cash.
Some financial advisors believe that asset allocation is more important than diversification. However, both concepts are based on the same principle of spreading out investments to minimize risk. Investors looking for opportunities to grow their money should consider meeting with our team of Spokane Financial Advisors to discuss the best options for their individual needs.
Within Categories
When it comes to diversifying your assets, it's important to consult with a financial advisor. Different types of stocks and bonds can yield different results, so it's crucial to have a professional help you make the best decisions for your portfolio.
While you may not see the highest returns possible by diversifying your investments, you'll be mitigating your risk in the long run.
Applying These Concepts
If you're looking for ways to diversify your investment portfolio and manage risk, there are a few steps you can take:
- It's important to choose an investment style that suits your needs. There are many different options available, so be sure to do some research to find the one that's right for you.
- Once you've chosen your investment style, you'll need to decide on an asset allocation. This will depend on factors such as your tolerance for risk and how soon you may need to liquidate investments. For example, younger investors may be more willing to take on riskier ventures, while those closer to retirement may want to play it safe.
Ultimately, it's up to you to decide how much risk you're willing to take on. But once you've done that, you can work with our team of Spokane Financial Advisors to find the best investment opportunities for you.
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Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. Asset allocation does not ensure a profit or protect against a loss.
