Diversify Your Assets Using Asset Allocation Strategy

You must diversify your assets using asset allocation strategies by age. A reader asked me on how to diversify his assets. Diversifying is very easy, however you should really know the reasons why do you need to diversify your assets.

The exact email I received from the reader is as follow; “I am interested in every articles you published especially if it is related to personal finances and investing. I start investing in stocks, I want to focus on stock investing. Do I need to diversify my assets? Why should I? Please give me a good reasons and teach me on how to diversify my investments, what are the other investment vehicles that can give me good ROI aside from stocks? I’ll wait for your response.”

I simply answered the sender of the email, “the more you diversify your assets, the more you keep your investments away from substantial losses”.

Lets’ clarify my answer about diversification in finance. First, I answered his first question “why do he need to diversify his investment?” As I’ve said, it’s to make your investments more safely from losses just in case there is a market crash in a specific market (example, stocks, real estate, etc.).

Diversify Your Assets

Second, diversification means not investing in a single vehicle. But, there is another diversification in a specific market especially in the stock market. Example, if you want to diversify your stocks portfolio, you must have stock shares from different companies in different sector or industry. (Example, tech stocks, finance stocks, pharmaceuticals, mining, oil and petroleum industry, foods, etc.)

Just in case if the stock market crashed, at least you have other investments (real estate, business) to earn profits that can help recover your losses in the stock market. I hope you get my point.

Asset Allocation is Important

To diversify your asset is simple. All you need to do is to create an asset allocation strategies depending on your age. Put your assets in different vehicles like bonds, cash, CDs, stocks, real estate, business ownership, etc. .Example, asset allocation for investors age 30. I hope you liked this article, kindly share it to other investors.