Investing can be a great way to grow your wealth over time – if you choose solid investment strategies. But many Canadians are not sure where to start. Even those who have investments regularly second guess themselves from time to time. Investing can be intimidating, but it doesn’t have to be. You just need to take the time to educate yourself and identify the best investment strategies that make sense for your lifestyle.
As with any investment, there is always risk involved. So, it’s important to make investment decisions and choose investment strategies that make sense based on your lifestyle. Don’t over-extend yourself and don’t invest in more than you are willing to lose. Diversifying your portfolio can help minimize your risk and maximize returns.
5 investment strategies to diversify your portfolio
There are countless ways you can approach investing. But time and time again, you’ll find that the key to making successful investments is to diversify. Here are five investment strategies that can help you diversify your portfolio.
Invest in different asset classes
One way to diversify your portfolio is to invest in different asset classes. Asset classes can include stocks, bonds, real estate, and commodities. Each asset class has its own risk and return characteristics, so by investing in multiple asset classes, you can spread your risk and potentially increase your returns.
Read more: Canadian Stocks Vs. American Stocks – The Pros & Cons Of Both Stock Markets
Allocate your investments across different sectors
Another way to diversify your portfolio is to allocate your investments across different sectors. For example, if you are investing in stocks, you can diversify your portfolio by investing in stocks across multiple sectors such as technology, healthcare, and energy. By diversifying across sectors, you can reduce the risk of your portfolio being impacted by a single-sector downturn.
Invest in mutual funds and exchange-traded funds (ETFs)
Mutual funds and exchange-traded funds (ETFs) are great investment vehicles for diversifying your portfolio. These funds invest in a diversified portfolio of assets, which can include stocks, bonds, and other assets. By investing in mutual funds and ETFs, you can gain exposure to a diversified portfolio without having to purchase individual stocks and bonds.
Read more: Passive Index Investing Vs. Active Stock Portfolio Management
Consider investing in international markets
Investing in international markets can also help diversify your portfolio. Different countries have different economic and political environments, which can impact their stock and bond markets differently. By investing in international markets, you can reduce the risk of your portfolio being impacted by a single country’s economic or political situation.
Rebalance your portfolio regularly
Finally, it’s important to regularly rebalance your portfolio to maintain your desired level of diversification. Rebalancing involves selling investments that have grown and buying investments that have lagged so that your portfolio remains aligned with your investment objectives. This can help you maintain your desired level of risk and return, and ensure that your portfolio stays diversified over time.
A final word on investment strategies
Diversification is a key investment strategy for reducing risk and maximizing returns. By investing in different asset classes, sectors, mutual funds and ETFs, international markets, and regularly rebalancing your portfolio, you can create a well-diversified portfolio that can weather market volatility and help you reach your long-term financial goals. But before you put any of the above investment strategies to work, consult a financial advisor.
Check out our investing resources to learn more.
