| Diversifying your investment portfolio is a way to | | | | investments include short-term certificates of |
| minimize downside risk in your investments. When | | | | deposits and money market funds. Money market |
| you diversify, you allocate your assets over | | | | funds give you an easy access to your money |
| different kinds of investments such as stocks, | | | | and can be considered a conservative investment |
| bonds, and short term investments. | | | | that offers stability of the principal. But compared |
| This time tested strategy helps reduce the risk of | | | | to bond funds or individual bonds, they usually |
| losing your assets on a single investment. Aside | | | | have lower returns. |
| from balancing your overall portfolio, diversifying | | | | Diversifying Your Investment Portfolio |
| within each investment asset class is also | | | | Knowing the risks and rewards of each type of |
| important. There are usually three asset classes | | | | investment, you must now decide on how to |
| where you can spread your investments. | | | | allocate your investments. Your decision will |
| Stocks | | | | depend on your goals as an investor. One of the |
| A stock is a share of ownership of a corporation. | | | | factors to consider when creating your own |
| Stocks often know as equities or shares, | | | | investment portfolio is the amount of time you |
| represents the most aggressive part of your | | | | have until you need the money. |
| diversified investments. Stocks carry a high | | | | An investor with a longer time frame may want |
| amount of risk but usually offer the higher | | | | to consider an aggressive investment strategy |
| rewards especially in the short term. This is due | | | | that focuses on stocks. Although this poses |
| to the unpredictability of the market. But stocks | | | | greater risks, it is best for long-term growth. |
| also provide opportunity for higher growth in the | | | | When your goal is not that far away, you might |
| long term. | | | | want to adjust and create a more conservative |
| Bonds | | | | investment portfolio. This may be done by shifting |
| Governments, companies, banks, public utilities and | | | | your investments to fixed income mutual funds |
| other large entities issue a fixed interest financial | | | | or treasury bonds. In retirement, a higher |
| asset called bonds. Bonds do not act the same | | | | percentage of your investment portfolio should be |
| way as stocks. They act as a cushion from the | | | | stable, income-producing investments. In order to |
| unpredictability of the stock market. Investors | | | | combat inflation, you must also continue to invest. |
| that are concerned more about their financial | | | | Diversifying your investment portfolio is just a |
| safety rather that growth often allocate their | | | | matter of asset allocation. Depending on where |
| investment portfolio towards bonds because they | | | | you put your investments, a diversified |
| provide regular income and low risk. | | | | investment portfolio is a helpful way to be |
| Short-Term Investments | | | | successful in the future. If your money is that |
| Short-term investments are those investments | | | | important, you must therefore plan out your |
| that mature in 12 months or less. These | | | | investment portfolio before investing. |