Portfolio not diverse enough? 3 ways to diversify | Smart Switch: Personal Finance

(Maurie Backman)

You’ll often hear that it’s important to maintain a diverse investment portfolio. And that’s good advice.

A diverse portfolio could open the door to creating a great deal of wealth over time. Just as important, diversifying your holdings could help minimize losses during periods of stock market volatility (something today’s investors can know a thing or two about).

If you feel that you need to diversify in your portfolio, you can try to accumulate stocks in sectors of the market in which you are not currently invested. But an easier or better route may be to add these investments instead.

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ETFs, or exchange traded funds, are joint ventures that allow you to own a bunch of different businesses at once. If you’re looking to diversify, it’s worth adding broad market ETFs to your portfolio. Doing so is an easy way to diversify without having to think hard or spend a lot of time on your business. stock selection decisions

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Let’s say you decide to buy shares of a S&P 500 ETFs. By doing so, he effectively becomes a part owner of 500 different companies. If that’s not diversity, what is?

2. REITs

REIT, or real estate investment companies, are companies that make money by operating different properties. They are similar to stocks in that many are publicly traded and pay dividends to investors on an ongoing basis. But because they’re not selling a service or product, but instead have a different stream of income, they’re a good way to diversify your portfolio.

You should also know that REITs must distribute at least 90% of their taxable income to shareholders in the form of dividends each year. Because of this, you’ll commonly find that REITs pay higher dividends than your typical stock.

Now it is important to diversify within the world of REITs. That could mean buying some industrial REITs, some data center REITs, and some health care REITs. Just as you wouldn’t want to own only stocks from one sector of the market, you should also avoid that when buying REITs.

3. Crypto

cryptocurrency it’s not for the faint of heart, and there are risks associated with owning it. But if you have yet to venture into the world of digital currencies and are looking to branch out, then it is an option worth considering, with a few caveats of course.

Do your research first before you dive in as there are actually thousands of cryptocurrencies you can choose to invest in. Then start small. Instead of investing 25% of your portfolio in crypto, start with, say, 2-5% of your assets and see how it goes. Or, start with 1% if you’re scared of owning crypto and not really sure it’s the best option given your long-term strategy and risk appetite.

The crypto market can be very volatile, more so than the stock market. Therefore, you will want to take things slow if you are going to expand into digital currencies.

Maintaining a diverse portfolio could be your ticket to success as an investor. Consider ETFs, REITs, and cryptocurrencies if you’re looking to mix things up.

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