Nov 10

Asset Management Essentials 3

2. Diversify your portfolio

This is the golden rule that asset managers go by. Diversification means that you need to put investments in more than one product and not in one investment product. The yield can be good but it isn’t worth it to risk your entire savings in one go.

If your asset manager has not done this, think twice before continuing with their services. The adage “Do not put all your eggs in one basket” holds true for this field.

Investments can be lucrative, but they can also be very risky. Even those that are considered a surefire success can suddenly fold, leaving you with big losses. The greater the risk, the higher the reward.

That is why you need to make sure that you have something to fall back on if one investment falls through. If you diversify your investments with proper asset management, you can still count on your other investments to give you a secure foundation until things start to cycle upwards again.

One drawback to certain types of diversification is that some markets are interlocked. For instance, the stock market and bond markets will generally go in opposite directions. So investing in both will pretty much guarantee that if you are gaining in one, you will be losing in the other and achieving zero growth at best.

However, keep in mind that stocks are generally more volatile than bonds. If stocks drop they will generally lose value much more rapidly than any gains in the bond market.

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