As 2018 ends, I thought a good way to start the new year might be to take a quick overview of some of the previous year’s most popular posts. (And some of my highlights!) Some of them are recent, some a little older – from 2017 or 2016. But all will help you get started enriching your life in 2019!
Diversification is an important topic, but one that isn’t well understood. And I don’t just mean by the general public. Investors aren’t great at understanding it either, apparently. Less than half of investors surveyed by the ASX (46%) claim that their portfolios are diversified. And even that group holds just 2.7 financial products on average. A further 40%, who held 1.6 products on average, said they knew their portfolios were not diversified enough. But most worrying of all, 15% of investors admitted they didn’t know if their investments were diversified or not.
So how do you know if your investments are diversified? Or if they are diversified enough?
Perhaps you’ve heard the idiom ‘don’t put all your eggs in one basket‘?
This phrase pretty much sums up the concept of ‘diversification’.
‘Diversification‘ is a risk management strategy, usually applied to investment portfolios. Investing all of your money in Coca-Cola shares would be an example of poor diversification, while having a portfolio that consists of some investment property, 15-20 different companies’ shares across a variety of different sectors, a bit in cash, and some bonds and international stocks would be considered much more diversified.
But have you though about the concept of ‘diversification’ in relation to your income?