In today’s economy, building wealth is more important than ever. With rising costs, uncertain markets, and a growing population, you should consider having a diversified approach to your finances.
Diversification is a key strategy often used by investors to manage risk and possibly maximize returns. By creating a portfolio with a variety of assets, you can spread your investments across several types designed to help achieve a balance between risks and rewards.
Different Types of Stocks
The stock market offers a wealth of opportunities. Investing in a mix of stocks from different sectors allows you to spread your risk out across multiple companies. This way, if one sector doesn’t perform well, you’ll still have other sectors which might be doing better.
Mutual Funds
Mutual funds are professionally managed and include stocks, bonds, and other securities. These funds are created and managed by investment firms and may offer an excellent way to refine your portfolio without having to do a lot of research.
Exchange-Traded Funds (ETFs)
ETFs are similar to mutual funds but are traded like individual stocks on the stock exchange. They are more flexible than mutual funds and often have lower fees. ETFs offer a way to change up your selection by investing in a variety of different assets.
Real Estate
Real estate could be another excellent addition. By owning real estate, you have the potential to earn rental income and appreciate the value of the property over time. Real estate may also offer tax benefits, including deductions for mortgage interest, property taxes, and depreciation.
Commodities
Commodities, such as gold, oil, and agricultural products, might protect against inflation. These types of assets are typically not correlated with the stock market meaning they have the potential to offer a hedge against volatile markets.
Alternatives
Alternative investments, such as hedge funds, private equity, and venture capital offer unique opportunities. These ventures could have higher fees and risk but may offer the potential for much higher returns.
International Investments
Investing internationally also provides a way to vary your portfolio. By investing in international stocks, funds, and ETFs, you can take advantage of the growth potential of other global markets.
Yourself
Investing in yourself by acquiring new skills, education or training tends to increase your earning potential and provide a greater opportunity to increase your net worth.
Using a mix of these strategies may support stronger long-term growth while minimizing risk. As you grow your portfolio, it’s important to regularly review your holdings to help ensure they are still performing well and aligned with your financial goals.
However, diversification does not guarantee profit or protect against loss. It only assists in managing risk. That’s why it’s important to speak with a financial advisor to determine the best approach for your unique financial goals and situation.
Work with us
At Independent Financial Services, we have professionals who can guide investment strategies, offer tax-efficient savings options and assist in retirement and business succession planning.
Schedule a call with us today to learn more about how we can help!
Material provided by Redfern Media, an independent third party. Raymond James is not affiliated with and does not endorse the opinions or services of Redfern Media. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but there is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Raymond James and its advisors do not offer tax or legal advice.You should discuss any tax or legal matters with the appropriate professional. Investing involves risk and you may incur a profit or loss regardless of the strategy selected, including asset allocation and diversification. Every type of investment, including mutual funds, involves risk. Risk refers to the possibility that you will lose money (both principal and any earnings) or fail to make money on an investment. Changing market conditions can create fluctuations in the value of a mutual fund investment. In addition, there are fees and expenses associated with investing in mutual funds that do not usually occur when purchasing individual securities directly.
ETF shareholders should be aware that the general level of stock or bond prices may decline, thus affecting the value of an exchange-traded fund. Although exchange-traded funds are designed to provide investment results that generally correspond to the price and yield performance of their respective underlying indexes, the funds may not be able to exactly replicate the performance of the indexes because of fund expenses and other factors. Real estate investments can be subject to different and greater risks than more diversified investments. Declines in the value of real estate, economic conditions, property taxes, tax laws and interest rates all present potential risks to real estate investments. Investing in commodities is generally considered speculative because of the significant potential for investment loss. Their markets are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising.
Alternative investments involve substantial risks that may be greater than those associated with traditional investments and are not suitable for all investors. These risks include, but are not limited to: limited liquidity, tax considerations, incentive fee structures, potentially speculative investment strategies, and different regulatory and reporting requirements. Investors should only invest in alternative investments if they do not require a liquid investment and can bear the risk of substantial losses. International investing involves special risks, including currency fluctuations, differing financial accounting standards, and possible political and economic volatility.