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It is a good idea to diversify your investment portfolio as much as possible. By having money in a variety of investments, you won’t lose all of your money if a particular sector of the economy does poorly. If you’re just starting out as an investor, what can you do to easily manage and diversify your portfolio to ensure consistent returns?
Buy Mutual Funds
The easiest way to manage and diversify your portfolio is to buy shares of mutual funds. A mutual fund is a collection of different companies in one or more sectors. For investors who want maximum diversity, it is possible to buy index funds.
An index fund buys shares of every company in a particular index such as the S&P. You can also choose to buy funds comprised of mostly large companies, small companies or overseas companies.
Furthermore, you can diversify even more by purchasing shares of more than one fund. By purchasing shares of a growth fund while also purchasing shares of an income fund, you negate some of the volatility that you see from the growth fund.
Invest In Different Commodities
You want to make sure that you own a variety of commodities to ensure maximum diversity from your portfolio. Many investors will buy gold, real estate and government bonds to supplement their investment in the stock market. Gold is a good investment because it is fairly liquid and retains its value well. Government bonds are one of the safest investments that you can make while real estate offers you several different ways to make a solid return on your investment.
Know Where You Can Go For Help
It can be overwhelming to manage several different investments on your own. If you are a novice investor, you may not know what to look for when making an investment or how much of a return that you can expect from that investment. Partnering with a trusted professional is an easy way to manage your portfolio and come up with ways to maximize your money. A good financial professional will also be able to help you manage your portfolio with respect to federal and state taxes. For example, it may be a good idea to sell investments that are losing money because you can deduct those losses on your tax return.
Here’s a great list of what not to do when you first start out investing in the stock market.
If you are having trouble diversifying your portfolio, you are not alone. The good news is that there are easy steps that you can take to make sure that there is more diversity in your portfolio. By investing in gold, putting your money in mutual funds and looking to real estate as an alternate investment opportunity, you can protect and grow your money for years to come.
Diversification is key but you also need a plan. There is no point in buying random stocks or mutual funds when the feeling strikes you. Having a plan and sticking to it will increase your chances of being a successful investor greatly.