Every investment decision involves both risk and reward. You invest your money with the hope that you’ll be rewarded with a profitable return over time. But, the fact is there are few guarantees in life. Most Investments are exposed to risk, which is the potential for loss of assets. To reduce risk, most smart investors diversify their portfolio. It’s a strategy to help reduce vulnerability to market changes in one investment category.
Most Investments are exposed to risk, which is the potential for loss of assets.
3 Questions to Answer
An efficient diversification strategy for you depends on:
- What are you saving for?
- How much time do you have?
- How do you feel about handling risk?
An investment approach to pay for a child’s college education may be different than saving for your retirement. The difference in your time horizon often affects your investment decisions and how you feel about assuming risk. To find your risk tolerance profile you can use our free tool here.
How Do You Feel About Risk?
Some investors are risk-averse and prefer a conservative approach while others are willing to invest aggressively to reach their objectives. Over time your investments will grow or decrease along with market conditions.
The Importance of Rebalancing
A portfolio may need to be rebalanced to maintain diversification or adjusted to reflect the change of your investment goals. Your portfolio might have assets spread across a number of investment types matching your risk tolerance and your time horizon. Regardless, your portfolio should be monitored and adjusted along the way. You should create an investment roadmap to help you achieve your personal goals. Feel free to reach out if you need assistance creating a portfolio appropriate for you.
Your portfolio should be monitored and adjusted along the way.
For more financial planning tips, download my free report: “8 Steps to Organize and Optimize Your Financial Life”. Thanks for reading!