Diversify Your Investments - Dont keep all your eggs in one basket

Diversify Your Investments - Dont keep all your eggs in one basket

All too often we hear about diversification and the stock market savings plan. But what does it really mean? And how do we apply it to our own lifestyles? Diversification is a term used to describe a very simple fundamental. It means to spread your money around, so that if one investment doesn't work out, you don't lose all your money. Diversification also makes sense because no single asset class can be an outperformer consistently across economic cycles.

There are a plethora of investment solutions and their numerous hybrids available the in the market for one to get confused with. Gold, real estate, Fixed deposits, equity and mutual funds would feature in the simplest of asset class lists that your neighborhood financial advisor will draw up for you. Let's look at the ones which remain un/under explored.

Gold: Anything which is finite in supply and has a continuous demand is logically supposed to trade at a premium. Gold has remained an asset class which goes back in history as an international currency and is never expected to lose the premium associated with it completely. Gold traditionally moves inversely to the equity markets and therefore acts as an ideal hedge to your investments in the stocks. But do remember, All that shines is not gold and even gold can lose some of its sheen in typical stock market Bull runs.

Debt Instruments: We all understand debt instruments to an extent but still are unable to make appropriate use of the opportunities it presents. Not long ago we saw big corporates borrowing at high double digit interest rates as the world was reeling under liquidity crunch. Does it have a hidden lesson for all of us?? A judicious mix of Government and top rated debt instruments has the potential to provide double digit returns over the long term in an economic set up like India. Debt is synonymous with security but one must understand that every investment comes with a risk else a return can't exist! The higher the interest rate on offer higher is the risk.

Real Estate: In India real estate traditionally is considered to be built as a legacy planning exercise. But one needs to deep dive to be able to understand the prospects on offer by building small land banks over a period of time. We all have seen the population of India outgrow the Million' mark and therefore the need for the Billion'. But have we heard about the geographical boundaries of our nation expand in the same period? It is again a question of demand and supply, finite resource vs infinite needs. We all hear the slogans for double digit GDP growth but we all need to understand that if India were to make such rapid progress, every yard of land would have to sweat that much harder. So in a nutshell, it's a question of how many sq yards do you have in your investment backyard?? Real estate can provide you with appreciation, tax breaks, regular income (rental) and business opportunities. While the basket of returns is bigger than other asset classes, one needs to evaluate the overall quantum of exposure in line with the appetite and investment potential.

Please keep in mind that a diversified investment strategy does not eliminate risk or guarantee success. What it does is, offer a way for you to earn potentially higher returns over time without exposing you to the greater risk of more aggressive strategies.

POST COMMENT

Good Psychological Agents Try To Figure Out Is The Key To Investment Success Salehoo Vs Worldwidebrands-Get the highest return of your investment Investment Opportunities in Goias Great Investment Opportunities In Shipping Container Industry East Of England – Providing World Class Investment Opportunities Dunedin, NZ – Providing World Class Investment Facilities Dubai Investment Property: How To Get Started Things You Should Know About Venture Capital and Investment Guangxi Liuzhou Urban Construction Investment 100 Billion Yuan Off Peak - Guangxi, Investment, Urban Choosing a Property for Investment Property Investment Opportunities in North Cyprus Investment UK Property And Ski Property In Switzerland Caring For Organic Bath Towels As An Investment