Keeping all one’s eggs in one basket is not a financially sound notion. As in life, diversity is spice and building up a healthy investment portfolio a worthy goal. A diversified investment portfolio is a collection of investments in a variety of assets to obtain the highest returns while minimising the risks involved.

A diversified investment portfolio would typically include investments in stocks, fixed income and commodities. The success of diversified investments lies in the fact that these assets react differently to changing economic circumstances. When one rises in value, the other may decrease eg. in economic grow spurts, stocks do well while in an economic slump, fixed assets, like bonds, do better. Commodities, on the other hand, are stabilisers in fluctuating economic conditions.

The overall risk is reduced when investments are diverse.  The possibility of a whole portfolio being wiped out by an economic crisis is less likely when investments are of a multi-faceted nature. 

If there is one lesson that we have learnt during the past few years and even from the current events in the news, it is that the world is unpredictable. Wise financial planning would include building an investment portfolio that will withstand the tumult and give you a steady and dependable return.

The building of a diversified investment portfolio can be a daunting task and one can be grateful for experts that are able to advise on the different investment opportunities that are out there.

Red Dot Now provides accounting, payroll and tax compliance services using the best of breed online technology.

Should you want to discuss this or any of their services further, contact Ryan Coates on e-mail at ryan@reddotnow.com