There’s very common saying “Do not keep all your eggs in same basket. Diversification means same, do not invest in only one asset class/only one sector. In India people generally prefer in investing in only two asset classes which are Gold & Real Estate.Historically they are known to give good returns & less risky,But in order to secure your portfolio from all ends & to earn more than inflation rate “Diversification” is very important.
Reasons to Diversify
- Mitigates the Risk : During the
financial Crisis of 2008,Real estate rates came down drastically in USA &
its effects were felt across the world.So even real estate can be risky.Hence a
person who has diversified his investments will be less affected during a
crisis than a person who has invest all his capital in one asset. - Key to beat inflation : If
diversification is done properly then it can beat the inflation & can
provide better returns than the market.
How to Diversify your Portfolio?
- Check your Portfolio : In order to
diversify people should first check their portfolio & analyse their
existing invesmtnet.They should know their amount of exposure to each of the
asset class.
- Goals : Before Diversifying people should
be clear with their goals (Both long Term & Short Term) and based on that
they should invest.For Example : If a person has a long term goal & He/She
has just started earning then they should invest more in equity as it known to
give higher returns.
- Do not over Diversify : Sometimes people
in order to diversify,they over diversify. For example.they invest in two/three
similar schemes of different Companies.
- Hire a Registered Financial Planner : A
financial Planner is professional who not only take care of your invesmtnets on
your behalf but also gives you time to time advice on the Market Scenario and
accordingly guides you to How to allocate your porfolio & also in What Proportion.Hiring a professional
is always the best option if you are not able to track your investments.Always
hire a Sebi Registerd Financial Planner/Advisor like www.moneyfrog.in where one can monitor
& track one’s investments as per Financial Planning & Life Goals
online,as well as speak & have periodic reviews with qualified advisors
