Home » Why a Diversified Portfolio is Important

Why a Diversified Portfolio is Important

Why a Diversified Portfolio is Important

This is a collaborative post. All views and text are mine.

Obviously, your regular income is the biggest tool you have when it comes to growing your wealth – if it’s not coming in, you can’t put any of it into your savings account, buy another ETF or buy a few more pieces of silver or gold bullion from Golden Eagle Coins.

The second-biggest tool at your disposal is diversification.

What exactly is diversification?

You’ve heard of diversification and you know that it’s a good thing, but do you actually fully understand it? It’s not just dabbling in lots of different assets to make life more interesting, it’s an important risk-management strategy. A diversified portfolio with lots of different types of assets – metals, futures, mutual funds, stocks and bonds will bring better returns and present lower risks than any of the individual investments within it. Of course, the investment trend at the moment is cryptocurrency (click here to learn more), which some see as a risk, but it’s up to you to assess that risk yourself.

Some good reasons to diversify

So, diversification already sounds great, but you’d be surprised by how many people don’t bother. This is possibly because they don’t recognize all the reasons.

It lowers your risks

If, for example, you have all your investment in one company and the chief executive officer suddenly gets arrested for fraud, you’ll see most of your investment wiped out in moments.

On the other hand, if you have your investment spread over ten different companies and the same naughty CEO ends up with his three hots and a cot, you’ll lose at most 10% of your investment. Even better, if you’ve invested in a rival company, you might see their shares picking up in value. This is where timing your investments becomes important also. You don’t just diversify your paper investments, either. If the stock market takes a beating and you have some physical precious metals, you’ll find they gain some serious value.

And when this happens, you should start to notice some differences to your wealth and if you’ve invested in precious metals, this should be a positive difference. When it comes to investing, you shouldn’t rely on one thing to make you money but instead should try and invest in as many things as possible so you have a better chance of getting money back. Lear Capital, or somewhere similar, can help you on this investment journey and can help to get you started by setting up your own precious metals IRA which will allow you to hold these assets. If you’re looking to expand your wealth and the amount of money you save, then diversifying your investments could be the way to go.

You use different investment styles

There’s more than one investment strategy. Two common ones are value and growth. Value looks at the basic strength of a company and its management; you look at whether the stock price is realistic or not according to estimates of its actual worth.

With growth, you look at how much the value of the company is going to grow, not the absolute value. Growth is about how new products and developments, for example, are going to raise the value of the company and how soon.

You should have a mixture of growth and value investments so that you get the advantages of both.

Diversifying helps to prevent home country bias

It’s easy to limit your investments to the country, region or industry that you know best. You may even invest for sentimental reasons. To a certain extent this is natural – you’re supporting your local area and your industry. However, if you only have this narrow focus you’re going to miss out on other markets that you don’t know – yet.

Diversifying shunts you out of your comfort zone and forces you to learn about other industries, markets and economies so that if your industry in your state goes through a slump, another sector elsewhere can pick up the slack.

Diversifying protects your investments

Once you’ve seen for yourself how a diversified portfolio can cushion you against adverse market events, you’ll want to do it a bit more. Don’t take a scatter-gun approach, though, you still need to do your research and take some advice before you make your choices.

Jocelyn Brown
Jocelyn Brown

A former school teacher, Jocelyn Brown created Hip Mama’s Place in 2007. Her motto for this blog is: get inspired, create and share! Jocelyn loves sharing about food and recipes, crafts, DIY projects and her random travels with her family. She also loves all things social media, but her latest obsession is Instagram.

Find me on: Web


  1. 02/23/2018 / 12:31 pm

    This is some really good advice. I’ve never heard of this before so you opened my eyes.

  2. 02/23/2018 / 12:15 pm

    This is a great reminder, especially with all the crazy things happening with the stock market. Since I first started investing, I’ve known that you need to diversify. Never put your eggs in one basket but you never know when the market might change.

  3. 02/22/2018 / 7:46 pm

    This is some worthwhile advice. Diversifying is making it onto my to do list.

  4. Ron Leyba
    02/22/2018 / 5:38 pm

    This is a very nice tip specially for beginners. You don’t want to put all of your eggs in one basket. Diversification is the key to success!

  5. Elizabeth O
    02/22/2018 / 1:05 pm

    This gave me a lot to think about, I need to think harder about my investments and money.

  6. 02/22/2018 / 3:45 am

    100% accurate. Even if you think your money won’t earn as much elsewhere, it probably means it is a safer investment.

  7. Gladys Parker
    02/21/2018 / 11:10 pm

    I haven’t heard it put so frank before. Usually someone is trying to get their own company built up. You have great advice and I will pass this on to my adult children which they and their spouses have the funds to do this.

  8. Our Family World
    02/21/2018 / 10:30 pm

    Very credible advice. I will have to talk this over with my husband. He is the one who manages our finances and so far he’s doing a good job. Thanks for this article. I do believe it is going to be useful for our financial planning this year.

Leave a Reply

Your email address will not be published. Required fields are marked *