More Than One Basket – Diversification

52 Simple Ways to Manage Your Money – 25. More Than One Basket – Diversification

What It is…

Investing money into different types of investments, such as bank certificates of deposit, stocks, bonds, and real estate.

How it helps …

Hedges against loss.

Provides safety and flexibility.

Key items to look for…

Investments with small minimums that provide the most diversification. For example, with 1500, you could invest 1300 in a bank certificate of deposit, $100 in a stock mutual fund, and $ 100 in a bond mutual fund.

Investments that fit your goals and objectives.

The cost of the investment.

Know how to get out of the investment.

Time …

As much as is necessary in order to educate yourself and make selections. Less if you use an advisor; more if you do it yourself.

One hour a month to evaluate.

Keys to action …

Review goals and objectives.

Determine investment amount.

Determine what investment areas, if any, are not covered.

Determine if you want to work alone or With an advisor.

Evaluate your options. (See chapters on certificates of deposit, stock mutual funds, bond mutual funds, income real estate, and annuities.)

SET IT UP

Survey your present investment holdings.

STEP ON IT

Sec aside money for emergencies first, then arrange priorities on the test.

STEP ON IT +

Look for balance.

The key is to avoid having one investment out of proportion to the others.

Notice…

Your reaction to diversification.

Your willingness to invest in new areas

Your willingness to participate actively in the decisions.

Your willingness to commit and take action.

But what if…

One investment doesn’t do well?

Not all the investments will do as well in the same year. Look for return over the long term.

Thought primers…

The good thing about spreading my risk…

The scary thing about trying something new…

The hard thing about making choices…

Taking action means…

When I realize I can always change my mind…

At the thought of acting responsibly…

more-than-one-basket-diversification
More Than One Basket – Diversification