The Power of Intelligent Diversification

One of the most essential recommendations and first tips for small and medium-sized investors when it comes to participating in equity markets and what could be called the decalogue of investment says the following thing: “You should always diversify the investment”.

The correct diversification of financial assets in any investment portfolio is the basis for adequate distribution of financial risks and as protection against future losses in a specific sector or specifically in some quoted value. Therefore, there are too many negative situations for your pockets that have been found many small investors from the financial point of view, at the time of investing bets based on one, two or very few assets of similar risk whether these are corporate bonds, investment in raw materials such as gold, promissory notes, or simple investment in shares of technology companies.

The reflection that should be done by readers and habitual followers of this section stock market advice, and possible current investors, is not only if this type of past media operations were performed poorly, as it was, but it should also be considered that one of the biggest mistakes (among others) was to bet all the capital destined to the investment to a single financial asset.

Currently there are many ways to diversify the investor bet and thus be able to dilute the risks taken in creating an adequate investment portfolio. Not only the possibility of diversification is intended to the capitals and from various investment funds up to the different actions of stock companies presented a wide range of possibilities for all types of investors according to their own profiles. Let’s look at some basic options or forms of diversification at your disposal:

• Depending on the time period of the investment: Investments may be made in financial assets destined for the short, medium or long term.
• According to the chosen sector: Here you can find listed companies in the industrial, financial, technological, energy, media … etc.
• According to the characteristics of its assets: It can be of variable income, fixed income, mixed income, commodities, bonds, structured deposits, specific investment funds, options, futures, warrants … etc.
• According to geographical economic areas: These are investments made in many other countries within the current globalized economies.
• According to the chosen agents: There should be several advantages of historic profitability obtained, financial risks involved and costs of management or administration, before there choose the agents of the different investment funds selected by the future investor.

All diversification of assets in investments will balance the positive and negative returns, so investments made in financial products with high volatility, potential higher yields and risk will be offset or attenuated by higher security assets and a lower investment risk.

Diversified investment for small investors will not consist of having many “different things”, rather it will be the result of having carried out a previous study and specific planning to each investor, by qualified professionals and legally authorized, who will be able to properly combine their investments and the correct distribution of capital.