Want to diversify your portfolio and secure your savings with smart investments? To do this successfully, there are a number of things you need to know. From investing in international markets to exploring a wide range of asset classes, here’s what all successful investors should be doing.
1. Spread your investment funds out
One of the most fundamental principles of a sensible investment strategy is to avoid putting all of your money into one place. No investment is ever guaranteed to perform well, and it’s not unheard of for investors to lose everything to one risky investment. By putting your life savings into one fund, stock, share or crowdfunded project, you’re giving yourself no safety buffer to fall back on.
Investing smaller amounts in a wider variety of places will stop you losing everything if one investment performs badly. To show what this looks like in practice, let’s say you have $10,000 to invest. Placing it all into one stock that then decreases in value by 10% means you’ll have lost around $1,000
However, spreading it across 10 investments could cushion this decrease, if the nine other investments increase in value by 15% and you’ve placed $1,000 in each. The extra $150 in each means that the overall value of your investments will have actually risen by $1,350. Even though these numbers are entirely fictional, we hope they give you a better idea of how effective a diversified portfolio can be.
2. Balance international and domestic investments
Lots of countries in Latin America, such as Brazil and Mexico, have shown encouraging signs of economic recovery following the Covid-19 pandemic. As such, many countries across the region are becoming exciting places for their residents to invest.
Eduardo Figueiredo, Aberdeen Standard Investments’ Latin American investment manager, explained:
“Brazil is benefiting from quickening economic activity, a healthy current account and a favourable outlook for commodities. [Additionally] Mexico is enjoying robust support from the rebound in manufacturing activity in the US.”
But no matter how strong your domestic economy is, one of the best ways to diversify your portfolio is by investing internationally. Strengthening your strong domestic portfolio with investments in markets that are historically stable is a great way to protect yourself against local fluctuations that could seriously impact your returns.
3. Invest in different asset classes
Smart investors know that, as well as investing in more than one place, you should look at different types of investments. Placing all your funds into stocks aimed at delivering short-term returns, for example, won’t give your portfolio any long-term stability.
Some of the most common types of asset classes you might look into include:
You could also explore crowdfunding, which allows you to invest far smaller amounts into tangible assets, like residential properties. It’s a great way to explore investments without putting lots of money into only one property. With Bricksave, you could invest in properties that are ready to welcome tenants, rather than properties that are still being renovated – meaning you can start earning your cut of a rental income straight away,
“A diversified portfolio helps your overall investments to absorb the shocks of any financial disruption, providing the best balance for your saving plan.” – Forbes
4. Invest in different industries
Some sectors, such as technology and pharmaceuticals, are doing very well right now, but that doesn’t mean you should place all your money here. The most sensible approach to making your portfolio diverse is to choose different industries in addition to different types of investments. If a sector-specific issue hits, your investments will be less affected if other sectors can prop the portfolio up.
As well as high-performance stocks that promise attractive returns, you should balance out your portfolio with stable investments – such as real estate – that can deliver reliable returns over a longer period.
You could also look at commodity-focused investments, such as oil and gas, or funds that invest in these companies, in addition to traditional stocks, bonds and tangible assets. If you’re not a confident investor, choosing a wide-ranging fund such as S&P tracker funds – which track the progress of 500 large companies in America – is a simple way to diversify.
5. Add property to your investment portfolio
If you’re already following the tips above, one of the best things you can do is add property to your investment portfolio. It has historically been proven as one of the safest bets for investors, and regions such as the US recorded a record-breaking year in 2020, with sales increasing 5.6% from 2019. What’s more, the average sale price for homes in America has risen by a staggering 15.6% in 2021, with prices increasing by 21.6% in the hotspot of Detroit.
As prices continue to climb, purchasing an entire property will become increasingly out of reach for ordinary investments. But with a property crowdfunding platform like Bricksave, you can invest in an attractive property with as little as $1,000. It’s a great way to enjoy ongoing income and potentially get a return on your investment when the property is sold down the line.
Invest in properties around the world and enjoy returns from the first month with Bricksave. You can find out more by checking out our how it works page.
November 25, 2021
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