Which are the best investment options to diversify your portfolio?
When you’re thinking of investing, diversification is important to make sure your money is protected from the risk and potential losses associated with the different methods of investing. To help you diversify your own portfolio of investments, we’ve listed some of the best areas of investment to help you find the options for you.
Property prices have historically trended upwards, which means that there is potential for capital growth when you invest in property. Property investment can also generate income through rental payments which can provide you with a regular stream of income, which can be used to cover your mortgage payments, living expenses, or save for retirement. Property is a tangible asset, which means that it is not as risky as some other investments, such as stocks and shares. This is because a property is a physical asset and doesn’t have the same associated risks of loss. You can also diversify your property portfolio, having a mixture of rentals for monthly income whilst also flipping properties to build capital, which you can then use on other investment properties or other forms of investment. As with any other investment, you need to make sure you’re researching the market and choosing the best properties to invest in wisely. Investing in the wrong properties or in the wrong area can lead to poor rental yields or a loss of profits when renovating a building to sell on. You can outsource the management of rental properties and tenants to a letting agency if you build up a significant portfolio of properties and struggle to handle them all yourself.
Commodities can help to diversify your portfolio and reduce your risk as they are not subject to the same economic forces as stocks and bonds. Commodities can act as an inflation hedge, which means that they can protect your investments from the effects of rising high street prices. Inflation can have a big effect on the value of commodities and whether or not they’re a good investment at the time. You can find out more online about how you should buy gold coins to help with beginning your investments in gold commodities. Commodities have the potential to appreciate in value over the medium to long term. This is because the demand for commodities tends to increase over time while supply remains restricted. It’s important to bear in mind that there are some risks involved with investing in commodities. Some of the risks associated with investing in commodities are that the prices can be occasionally volatile, causing big changes in the price they command. Investing in commodities can be expensive as you will need to pay for things like storage and insurance. However, the associated costs can be worth it if the commodity is performing well, so you need to consider the pros and cons to help you make a balanced decision.
Exchange-traded funds (ETFs)
ETFs are similar to mutual funds, but they are traded on an exchange like stocks. ETFs can be a good investment for investors who want the diversification of a mutual fund but with the flexibility of trading like a stock. They can be a good option if you want to combine the benefits of mutual funds with the benefits of investing in stocks and shares. They are not actively managed, so they don’t involve the costs of paying a mutual funds manager to oversee the investments for you. You can also access the investment more easily by buying and selling them versus mutual funds. They are more transparent than mutual funds, as they disclose their holdings daily to investors. You should take the time to research the different kinds of ETFs to decide which might be the right one for you to invest in. There are various different forms of ETFs to choose from, including:
- Index ETFs
- Actively managed ETFs
- Bond ETFs
- Commodity ETFs
Mutual funds are managed by an investment professional, meaning that you don’t have to be directly involved in making investment decisions. This can help with growing your portfolio and managing multiple investments, without adding any extra workload to managing your investments. A potential downside to investing in mutual funds is that there will be costs involved with paying someone else to manage them for you. Take time to consider the different benefits and downsides to mutual funds to help decide whether or not they’re the right investment strategy to suit you. It’s also important to make sure you choose an experienced fund manager to help make sure you are investing in the right areas of the market. Consult with various fund managers before choosing a fund manager to help make sure you find one without the right kind of investment strategy to suit your preferred style. You can also review their track records to see how their investments typically perform on the market and the reviews they’ve had from previous clients.