Diversify Investments

By Raine Financial Solutions Comments Off

Diversify your income. It’s a phrase that you may have heard quite a lot in recent years and there is a good reason for it. Gone are the days when families could safely rely on one job to get them through their entire lives. These days you never know when you might lose a job or that one job you do have just doesn’t cover everything you need it to. This is where diversifying your income comes in. The idea is having several different sources of income so that if one is lost you aren’t completely without money. This same idea applies to having investments. You don’t want to put all your money into one company or even one industry. In other words, you don’t want to put all your eggs in one basket.

A Modern Example

Consider if you will the tourism industry. In 2019 tourism around the world was riding an all-time high and as a result, investing in an airline or even a hotel chain might have seen like a sure investment. It could have been tempting to jump into the deep end of the pool and make all your investments in the tourism sector. But, towards the end of 2019 the unimaginable happened, a virus spread across the world grinding tourism to a halt. No one could have predicted it and if you had put all your money into tourism you would have taken a big hit in your investments.
If you had instead diversified your income and had some investments in the tourism industry but you also had some in Zoom and in medical supply companies your portfolio would actually be doing very well. Yes, you would have taken a small hit on those airline investments, but it’s a much smaller amount than it would have been if all your investments were there. Plus, with Zoom and medical supply companies, you would have been seeing a significant increase. That’s the power of diversification.

How do You Decide Where to Invest?

When you begin investing I think it’s important for you to invest in a company you believe in and enjoy. If you love hiking then maybe look at REI or another outdoorsy brand. But then consider other things you love. Is there an airline you love flying with? Do you have a favorite brand of ice cream? Of course, you shouldn’t go into these things blindly, look up their stock performance, and see if it is a wise investment. But, starting out with investments that call to your heart is a great way to get your toes wet as well as make sure that you have diversified your portfolio from the very start. It can also be helpful to ask teenagers what things they’re interested in and invest in them. You never know when you’ll catch the next rising tech industry.

Conclusion

No matter how much money you have for investments you should be diversifying your portfolio by investing in a variety of different companies and industries. Doing so will not only help you weather unexpected downturns in a given area but they will also allow you to take advantage of sudden upswells too.