Diversification

Don’t put all your eggs in one basket. Did you think about the debt-to-equity balance rule for an asset allocation based on your age? This rule can guide you and so can another concept.

Diversification is key when it comes to investing.

Having a portfolio with mixed assets such as with stocks, bonds, deposits, index funds, managed funds from different industries such as health, pharma, property, gold helps in minimising risk and provides a safeguard against ever-changing market dynamics.

You can minimise losses by choosing the right group of investments, and earn a stable return.

For investors with limited financial knowledge instead of buying stocks, an index fund or managed funds is a good option. Having managed funds and ETFs of various assets minimises risk and provides a good return on investment.

Watch this short YouTube clip which explains diversification. Note that there are two levels of diversification. The first is by asset class (i.e., stocks, bonds, cash) and the second is across investments.