People afraid of the constant ups and downs of the stock market might shy away from investing. It can be hard to predict when the right time to buy or sell is, but it doesn’t always have to be a risky game. There are things you can do to reduce the chance of losing big – first and foremost something called portfolio diversification.
This does not constitute advice and advice should be sought in all instances before acting on it.
Investing isn’t exactly a straightforward practice. There’s no way to predict how your investments will perform, when they’ll hit their peak, or how much you’ll have gained when it comes time to cash out. Because we can’t tell the future, diversifying your assets is the best thing you can do to mitigate the risk of major losses.
Why does it help?
By having various kinds of investments, you can help reduce uncertainty and risk associated with certain asset classes. To maximise the performance of your portfolio, you can rearrange the mix of the assets you hold based on market conditions. You can change around your asset mix or even within a selected asset class and reevaluate your attitude toward risk to select the best-performing investments for you.
It sounds like a fancy term, but all asset allocation means is that you can decide how to spread your money across the available asset classes – equities, bonds, property, and cash – and how much money you want to hold in each class.
When selecting your asset allocations, keep in mind when and how much money you’ll need in the future and make choices based on your attitude toward risk. This strategy naturally spreads risk across your assets, but it can also have the side effect of boosting your returns while maintaining your portfolio’s risk level. Ordinarily, you’ll want the strategy that will maximise your returns, but everyone has their reasons for their attitude toward risk.
The reason for allocating your money across different assets is to spread risk through a diversified portfolio. No matter how strong your portfolio is, it will perform differently in different conditions and what goes up must come down as the market is a constant cycle of peaks and valleys. But depending on the assets have and the performance of the market, you can mitigate the risk associated with investing.
When you’re younger, you can afford to be a little riskier since you have plenty of time before you need to cash out to build your wealth. When you’re older and have numerous financial responsibilities, you might become a bit more conservative.
Not only will your own risk tolerance change over the years, but the potential returns you can make on investments and the risks associated with them can change as well. It could be for economic, political, or regulatory developments, but there’s no way to tell how profitable a certain asset will be long-term.
Ready to get started?
No matter what point in life you currently are at, you will always have goals regarding your essential needs, lifestyle wants, and legacy aspirations. You don’t have to go it alone though. Getting advice could make all the difference in achieving your dreams.
To learn which investment options are right for your individual circumstances or to find out more, contact Dental & Medical Financial Services today.