Website Screenshots by PagePeeker Diversification is Important in Investment – Heres The Answers

Diversification is Important in Investment


To achieve financial freedom, investment is one method to help us overcome inflation rate and let money work for us. As we know, higher the return is come with higher risk. To secure our nest egg or future money, we must learn the tactics of diversification. This is the strategies to reduce the risk factor.

Never put all your eggs into one basket as expert tell us, otherwise if the basket drop, all the eggs are likely to break. In others word, if you put all your money into one stock market, you could lose all your money once the stock plummets in value.

to avoid lose all the investing money, the tactics of diversification should be apply. Diversification is the tactics of spread around our money to several investments vehicles.

A diversified portfolio will let our money to invest in different investment vehicle, then for stock market, we invest in different stock sector. Unit trust is a very to investment tools that it pool many small investor monies and invest in various stock sector. As the unit holder, we should also apply diversification tactics by invest in more than one kind of unit trust fund, which can be range from equity, balance and bond funds.

This tactics is to mix high risk and low risk investment vehicles and allocate it wisely to further increase our chance to get better benefits.

For the investor with high capital, the diversification can be done from stock market to gold, Forex, property, etc, which are from different group. However, for new income earner, this type of diversification is not possible, the best investment tactics for them are invest in unit trust or mutual funds, which this investment vehicles have the benefit of diversification in different stock market. The only thing can do is invest in few unit trust funds.

Diversification is a good method to minimize the risk, but it is not advisable to be over diversified, otherwise, it is very difficult to monitor your portfolio and result in loss control and finally reduce the average return rate.

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Source by Kim Guan Loh

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