Diversification Options for Your Investment Portfolio
Developing a solid investment portfolio is a major goal for many Americans, and yet CNBC reports that only 34% actively diversify their investments. Experts say this can arguably be attributed to a lack of knowledge in this field. Individuals don’t always give enough credence to diversification or think it’s too complicated. When, in reality, its importance cannot be stressed enough.
The Importance of Diversifying
As the U.S. Securities and Exchange Commission explains, diversification means investing in different sectors, financial assets, and such, so that risk is spread more evenly across varied markets. Because different assets will respond differently to economic movement and global events, diversification ensures that investors will not be at a complete loss at any one point.
Essentially, it comes down to making sure you don’t have all your eggs in one basket. Though it’s important to note that it isn’t necessarily a matter of having the most investments, but more so about having investments that belong in different categories. Having a diverse portfolio can serve as a shield against volatility in changing market cycles. In short, no matter how liquid the forex market is, it's always worth diversifying. Now, there are many choices in this regard, but here are a few options to look into.
Different Options for Diversification
Despite the economic shakeup that came with COVID-19, stocks are still viable options if you pick the right one. The financial guides on AskMoney note that common and preferred shares may have their own advantages, but the latter may carry more benefits. Preferred shares always pay dividends with priority. And their prices are expressed in percentage rates based on the number of dividends divided by stock price. The average fixed rates are also noted around 5% to 6%.
Right now, recommended funds for preferred shares are the following: Virtus InfraCap U.S. Preferred Stock ETF (PFFA), best-performing from May 2020 to May 2021 with a par value growth rate of 61%; iShares International Preferred Stock ETF (IPFF), valued at $60.5 million with a par value growth rate of 55.7%; and Infracap REIT Preferred ETF (PFFR) with a par value growth rate of 31.3% and an annual dividend yield of 5.95%.
Real estate investments are a relatively easy way to diversify your portfolio, especially now that apps like Concreit have closed a major $6 million seed fund to allow more people to invest in the global private real estate market. With this development, parties can invest in properties with as little as a single dollar.
Alternatively, another more “traditional” real estate investment route is getting into real estate investment trusts (REIT). These provide investors with access to real estate payoffs without the actual property under your sole ownership. The global real estate market is expected to grow to $3717.03 billion by 2025, so this can be a promising entry for your portfolio, but without the cost of maintaining a property.
The latest investment to blow up is cryptocurrency. As major companies, trusted brands, and governments begin to integrate this into the mainstream, crypto is now a recognized asset class. Though the most popular crypto names like Bitcoin and Ethereum still make up the majority of the market, altcoins are a great way to diversify your trading portfolio in the crypto sector. In particular, Dash has become one of the most popular private cryptocurrencies because of its greater stability compared to other competitors. A smart way to go into Dash investing is by going long-term and basing your investment on Price Action techniques, so you know when to sell and when to hold.
As you get more comfortable with investing, you may find other assets that you want to explore. Just remember that diversification is more about quality than quantity if you want to see your money grow. For more tips on forex trading, diversification, and more, check out the rest of our content on FX Trading Revolution.