There’s an age old saying, “Don’t put all your eggs in one basket.” While this may sound to be just about eggs, it’s actually very good advice for an investor. We’ve all had that one friend who tells you about some stocks that are in his portfolio that are going up in value day after day, but has to call you and ask for money the next day after their one investment goes belly up. Spreading your money around, although not 100% risk free and doesn’t bring about a hot conversation, goes a long way in protecting your investment, and also makes a lot of financial sense.

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So here are a few ways of diversifying your investment portfolio to keep your money safe.

01.Understand what you’re investing in

Knowing what you are investing is the most crucial thing when diversifying your investment. If you go out and invest in a few mutual funds and assume that your investment is diversified, you could be very wrong if those funds all invest in similar sources of income. So before you buy stocks, read their prospectus and figure out what their source of income is and understand how that fitting it is, to your portfolio.

02.Offshore investments

Whilst offshore investments are often made to seem very shady and illegal in the media, these are actually perfectly legal ways of earning money, if invested in legitimate funds. There are several advantages to doing this as well, some of which are; a chance to earn from foreign exchange gains, tax reductions (many countries offer high tax reductions to foreign investors) and high confidentiality. While this carries the normal risk that all investments do, investing a portion of your money in this regard makes a lot of sense.

03.Evolve your investment with your age

Having a diversified portfolio isn’t simply enough. It should change over time as well. For example, for a young person, there is more time on their hands to keep up with the stock market fluctuations and invest in somewhat more riskier funds. But as you age, you need to make sure to shift to funds that are steadier in their returns.

04.Have someone do it for you

Out there, there are now many companies or individuals who have pre-set diversified investment programs and will run your investments for you for a certain fee. If you are unsure of how to diversify your investment on your own, hiring such a person might make your life a whole lot easier.

05.Invest in funds with guaranteed returns

While the dividends that you may receive from shares may be high, they are most of the time dependent on company profit. But funds like government treasury bills and bonds, carrying a smaller return than company shares, guarantee a certain amount, if not fixed, to you after a certain amount of time. So if you are a risk-averse
person, this may make more sense to you.

06.Re-balance your investment periodically

From time to time, the value of your investments will change. So it may be in your best interest to sell some of your investments, however attached you may be to it and invest in other higher funds.

Author's Bio: 

Pritom Das is a Tech Entrepreneur, a business development consultant, a motivational speaker, and a freelance writer. He has Worked Exclusively as a full-time Freelance technology&lifestyle writer for 5 years.