4 great ways to diversify your portfolio for 2024
When building an investment portfolio, it can be tempting to find one asset or asset class you trust and build your entire strategy around that. There's just one problem with this, though – what if something happens and that asset or class collapses? With all your proverbial eggs in one proverbial basket, you're left high and dry. This is why virtually any financial advisor will tell you that diversification is the key to a successful investing strategy. If you're a newcomer to the world of investing, it may be a little bit nerve-racking to build a diversified portfolio.
Gold is a great way to do so. Start investing in the precious metal today.
4 great ways to diversify your portfolio for 2024
If you're looking to diversify your portfolio in the new year, there are some simple steps you can take to build a stronger, safer portfolio. Here are a few ideas:
Invest in gold
Gold is probably the oldest investment on the planet, and it remains a strong one for people looking to diversify their portfolios. Gold is a good way to add diversity for a few reasons, including that it acts as a hedge against inflation.
Inflation is always something that savers and investors have to think about, but it has been top of mind for many recently, as the inflation rate has been high for the past 18 months, peaking at more than 9% year-over-year in June 2022. If the inflation rate outpaces your investment return rate, you're actually losing purchasing power despite having more cash in your account. The value of gold tends to track alongside inflation, though, so your true value won't change too much.
Another reason to add gold to your portfolio is that it has intrinsic value and is a tangible asset – in other words, gold will more than likely never be completely worthless, whereas other assets like stocks and bonds could in theory completely crater.
Start your gold investment journey today.
Consider index funds
A mutual fund is an investment product that pools the money of many investors and buys various assets, generally stocks and bonds. When you invest in a mutual fund, you create a diverse portfolio without even having to make multiple investments. An indexed fund takes another step and invests across an existing stock index such as the S&P 500.
When you use an indexed fund, you basically invest in the market (or a sector of the market) as a whole. When the market goes up or down generally, so will your portfolio. You might not get the huge gains you could see if you pick an individual stock, but you also won't see all your money disappear if that company collapses.
Keep some cash
Don't forget about the fact that not all of your money needs to be in investments at all times. Keeping some money as cash not only protects you against market fluctuations, it also gives you liquidity if you have an emergency.
There are a variety of ways to keep money as cash, but some of the most popular are money market accounts, high-yield savings accounts and certificates of deposit (CDs). Whichever vehicle you pick, just make sure you're doing something where you'll earn as much interest as possible. Even if you're not making active investments, you still want your money to be working for you rather than sitting in a regular account doing nothing.
Talk to a financial advisor
Building a diversified portfolio isn't easy. If you're a novice investor or simply don't have the time to do the research needed to build a secure, effective and diverse portfolio, consider working with a professional.
A financial advisor will work with you to build a portfolio that fits your needs while making sure you have diverse investments to protect your wealth. Take the time to speak with a few potential advisors and find one whom you feel comfortable with. Some advisors will actively manage your portfolio with you while others will just help you draw up a plan, so make sure the advisor you pick provides the services you need.
The bottom line
Diversifying your portfolio is key to long-term success as an investor. If all of your money is focused on one asset or even just one asset class, you run the risk of losing your money if it turns out to be a bad bet. By putting money in many different types of investments, you protect yourself and your wealth. Gold is a solid investment for the purpose of diversification, as are indexed funds. A financial advisor can also help you build a fully diversified portfolio.
