3 simple ways to diversify your investment

Updated: Jan 24, 2020

Diversifying your investments is important to help keep your finances protected. Below are a few ways to diversify. Schedule a free consultation with me and I can help give you specific recommendations for your financial goals.

Non-correlating assets typically perform differently and, therefore, help diversify risk. Correlating assets are investments that go up and down at the same rate or in a similar manner. So when we're looking at your investments we want to make sure they are invested in non-correlating assets. The more non-correlation that you have in your portfolio, the less likely it will all go down at once or at the same rate. This helps protect you in case of an economic downturn.

Cash or dividend paying investments is an uncommon way to protect your portfolio, but a great option to consider. Often if the value of the investment goes down during a downturn the investment will typically still pay you a dividend. This means that you can still make an income off of your investment during the low years. And of course, you'll profit off of the capital gains during the good years. Also, if you are not ready to use the income off of your cash flowing investments you can reinvest those profits into another venture, which will lower your overall exposure to that investment.

Have fewer advisors. People often think that if they have more advisors then they must be more diversified and will have much less risk in their portfolios. Don’t get me wrong, if you have people that specialize in different areas such as public vs. private that may help to add diversification to your portfolio, but more often than not if you have two or three advisors that are investing in strictly public markets -- such as mutual funds -- your investments will likely be overlapping and the diversification that you think you have doesn’t exist.

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