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3 Benefits of Diversifying Your Investment Portfolio

3 Benefits of Diversifying Your Investment Portfolio
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By    |   Friday, 10 November 2017 02:30 PM

According to Elhamed, Arnold Schwarzenegger is a man who has marked his whole checklist of dreams. He was born in the small city in Austria, in 1947, then moved to Los Angeles at his twenties.

By the age of 25, he became Mr. Olympia Bodybuilder. He was working out 6 hours a day and doing 500 sit-ups. Before 30, he was a millionaire businessman. He went out, practiced real estate and he made his first million. After that, he was the world’s biggest movie star. His accent was in the way, he hired a coach to work 7 hours a day to get fluent in American accent.

He was elected the Governor of California in 2003. He spent 5 or 10 hours a day learning from a cabinet of political advisers. He is literally a full package, someone who had huge ambition, tremendous tenacity and a calculating business mind’.

This is a good example of a person who was not contented with a single income source.

Why is it important to diversify one’s investment portfolio?

Here are three benefits:

  1. Reduce Business Risk

Diversifying one’s investment portfolio is like having many pillars in a building. When a storm pulls down one, the others are there to keep the building safe. This is exactly what happens when there’s a diversification of investment. The justification for having multiple income sources is that one source of revenue can fail at any time due to unforeseen circumstances.

Take for instance; you have only one investment example your job or a small business. When an unforeseen circumstances struck like termination of employment, retrenchment, unfavorable government policy and turbulent business environment. These will have serious effect on your career and business except you have an additional investment.

The more you expand your investment portfolio, the less likely it is that a single event will negatively impact your portfolio. You have probably heard the phrase ‘Don’t put all your eggs in one basket’. This is because in the event one dries up, then there are other sources of income to mitigate the loss.

  1. More Investment Opportunities

Diversification opens you up to more investment opportunities. Take a look at the investment history of top CEOs and founders like Mark Zukerberg, Warren Buffett to mention a few, you’ll discover that they’re always searching for new investment opportunities. Study shows that Facebook has acquired more than 50 companies. If a big organization like Facebook is still diversifying its investment portfolios, you have no excuse.

There lots of investment opportunities in manufacturing, construction, social media, maritime, oil and gas, mining etc. For instance, combing paid employment with part time freelancing isn’t a bad idea. I strongly recommend real estate investment because its benefits span from one generation to another.

By registering on Upwork and Peopleperhour to mention a few, you can earn additional income from content writing, editing, proofreading, digital marketing etc. Influence.co enables you to profile your best work and connect with audiences, thereby letting brands know why they should work with you, while Real Estate Auctions connects buyers and real estate professionals and provides you with the tools to find your next property. Being accustomed to diversification will likely spur you to give a good opportunity a second look.

  1. Improves Your Standard of Living

According to Investopedia, ‘most investment professionals agree that, although it does not guarantee against loss, diversification is the most important component of reaching long-range financial goals while minimizing risk’. The good thing about diversifying your investment portfolio is that it won’t bring you quick riches, but it will steadily build wealth over time.

By investing in different areas that would each react differently to the same event, you’re sure to reach, you’re sure of reaching long-range financial goals.

Even in the face of recession, unemployment, inflation, retrenchment, unfavorable government policies, intense business competition, changing consumers’ taste and turbulent business environment, one with a robust investment portfolio will be overcome.

Because of the financial risks involved with relying on a job or one investment portfolio for all of your incoming cash, it is critical to diversify your investment portfolio and live a financial stress-free life.

Richard Agu is a Researcher, Entrepreneur and Freelancer, passionate about entrepreneurship and self-development. Currently, Richard writes for Entrepreneur.com, Goodmenproject.com, among others. Follow him on Linkedin.com by clicking here now.

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By investing in different areas that would each react differently to the same event, you’re sure to reach, you’re sure of reaching long-range financial goals.
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Friday, 10 November 2017 02:30 PM
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