Three tips for diversifying your investments

Three tips for diversifying your investments

 
Diversifying your investment portfolio can improve your potential for long-term returns. It can be done by investing in multiple asset classes, geographies or industries that suit your profile. With the right mix of investments, you could reduce the effects of market fluctuations on the growth of your assets.

Here are some tips for diversifying and growing your investments better:

1- Determine your profile

To get to know you better as an investor, the following question is essential:

What are your investment goals? Take a trip, buy a house, plan your retirement ...
How long will your money be invested? Saving for a trip or investing for retirement does not require the same investment horizon.
Do you have a good tolerance for market fluctuations? Reacting too quickly to these can lead to bad decisions.
First you need to set clear goals and be honest with yourself. Thereafter, you will be able to choose products that suit your projects and your profile.

2- Centralize your investments

You should always remember that the complexity of your portfolio is not a sign of diversification. To obtain optimal returns, it must be made up of various types of investments that meet your needs, depending on your investor profile.

By having several advisers in several financial institutions, you risk:

find yourself with products that you already have elsewhere, and therefore with an undiversified portfolio;
make double contributions to certain instruments, such as an RRSP or TFSA, which have maximum contributions, and incur penalties.
pay duplicate management fees that are typically associated with accounts.
Your advisor should have an overview of your investments to make the best recommendations, avoid duplication, and provide you with appropriate diversification.

3- Stay aligned with your strategy

Maybe you've heard advice like "now is the time to sell your bonds" or "now is the time to buy US stocks". These tips may be correct, but you should ask yourself whether they are helping you reach your goals based on your portfolio diversification.

Making additions that are not related to your original strategy could increase the risk level of your portfolio and adversely affect your returns. When the "right" opportunity presents itself, you need to ask yourself whether it will keep you aligned with your strategy.