5 Benefits Of Having a Diversified Portfolio For Investing

Investment decisions shouldn’t be made carelessly. They involve taking into consideration your:

  • risk tolerance 
  • timeframe
  • financial situation 
  • financial goals


Since all investments come with a level of risk, it may be worthwhile creating an investment portfolio that involves ways to mitigate the risks involved in investing. A diversified portfolio is one method that can help avoid falling into a loss and one that you may want to include in your investment strategy.


Not sure what an investment strategy is?

Check out our article on: Why Is It Important to Have an Investment Strategy?

What is a Diversified Investment Portfolio?

A diversified portfolio is a list of various investments combined to reduce an investor’s overall risk profile. It also means owning multiple asset classes such as a combination of stock, bonds, commodities, real estate and alternate asset classes. 


But how else does a diversified portfolio help investors get better deals with their investments? 
Here are some benefits of a diversified portfolio:


1. Mitigates Risk of Loss

Several investments make up a diversified portfolio. It means that you are not putting all your eggs in one basket. If one of your investments fails to perform, other investments can help cushion the financial impact.

If you want to reduce your investment risks, you may want to diversify your investments instead of limiting your selection to a single investment. If you are well-versed in the market’s condition, you can consciously create a diversified portfolio to ensure your financial security and achieve your financial goals.

2. May Allow You To Preserve Capital

Diversifying your investments may allow you to preserve your capital. If you can hold your wealth, you can use the same wealth to create a more significant base for your assets. This may allow you to make more money for your investments in the future.

If you can spread your investment risk by diversifying your portfolio, you can preserve your capital. You can also use the same worth to create a more extensive base for your investments. By keeping your capital, you have the potential to make more money for your assets in the future.


3. May Generate More Returns

Diversified portfolios that are evidence-based have a higher probability of increasing your financial returns. This is due to the diversified portfolio being made of various investments. 

Investors may want to find ways to learn how to create a data-driven diversified portfolio. By doing this, you have more chance of increasing your financial returns and decreasing your investment risk. 


This can also allow you to reach your financial goals quicker and reduce volatility and capital draw down!


What else is important to know when creating a diversified investment portfolio?


Here are a couple of factors to consider:


1. Understand the Market

As an investor, you want to know the current market you are in. You also want to know the current opportunities and risks. Stay informed of the current market to estimate the volatility and risks associated with a specific investment.

Poole Advisory provides a monthly market update to keep our clients and community well-informed about market conditions and any external factors or global events to be aware of that may affect their investment portfolio.

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You can create a diversified portfolio to learn more about the current market. By doing this, you will have a greater chance of understanding which investments to invest in. If you have a more significant opportunity to learn which investments to invest in, then there is a greater chance of generating the returns you are after with your investments.


2. Learn What Different Asset Classes You Can Invest In and Their Level Of Risk:

When you are making different investments, it’s important to look at which asset class they are within. 

If your investments are in the same asset class, they will tend to share a similar level of risk, regulations, and return performance. 

If you compare different investments in different asset class categories, they will have differing levels of risk and returns. 

Check out this article to learn more:  Exploring Different Asset Classes and The Level Of Risks They Have


Seeking Wealth Creation and Investment Advice in Sydney?

At Poole Advisory, we offer a range of investment advisory services and wealth creation solutions to help you achieve financial freedom.

Whether you’re an experienced investor looking to grow your wealth or a novice who is interested in taking the first steps towards creating a successful investment portfolio, our experienced wealth advice team can support you.

Speak to an investment adviser today by booking a complimentary appointment!

Compliance Disclaimer

This information contains general advice only, that is, advice which does not take into account your needs, objectives, or financial situation. You need to consider the appropriateness of that general advice in light of your personal circumstances before acting on the advice. You should obtain and consider the Product Disclosure Statement for any product discussed before making a decision to acquire that product. You should obtain financial or credit advice that addresses your specific needs and situation before making investment or borrowing decisions. Taxation information is based on our interpretation of the relevant laws as at 1 July 2018. While every care has been taken in the preparation of this information, Prosperitas Partners Pty Ltd does not guarantee the accuracy or completeness of the information. The case studies are hypothetical, for illustration purposes only and are not based on actual returns

Poole Advisory Pty Ltd ABN 15 642 040 604 is a Corporate Authorised Representative (No. 001282603) of Prosperitas Partners Pty Ltd ABN 30 662 654 453 AFSL 544 917

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