How To Best Diversify Your Investments (Even When The Market Seems Uncertain) – Forbes

December 12, 2021 by No Comments



To say that the market seems uncertain feels like a vast understatement. Inflation and ongoing supply chain woes are just a few of the issues creating uncertainty across practically every industry. When normally robust brands such as Apple and Amazon are reporting multi-billion dollar losses and missing earnings estimates, it is clear that practically every business is feeling the crunch.

While this could cause some business leaders to back out of making investments, this isn’t necessarily the best option. Yes, there is risk inherent in any kind of investment, but when looking at macro trends, the market has consistently gone up in value over the years — even after accounting for periods of recession.

To make your investments better able to withstand market uncertainty and economic turmoil, your best solution is to diversify.

Expand Investments To New Industries

One of the biggest mistakes that new investors make is funneling most — if not all — of their investment dollars into a single industry. For example, an investor might see huge growth potential in tech firms, and put all their money there.

While this can lead to rapid growth, it also poses significant risk if something were to negatively affect that sector as a whole. The famous “dot-com bubble” is a prime example of this. Venture capital investments in internet-related brands caused the Nasdaq to rise an incredible 400 percent from 1995 to 2000, only to suffer massive losses as countless companies failed.

I recently had the opportunity so speak via email with Natalie Erikson, regional head of strategic development at Axion Trade, a platform for trading Forex, indices, commodities, stocks and cryptocurrency.

She explained, “As the cliche goes, you should never put all your eggs in one basket. This is why new investors are often advised to invest in a mutual fund, since these portfolios have already been diversified to reduce risk. Of course, you can essentially build your own mutual fund by investing in diverse brands that you know and trust. Balance more volatile options with conservative stocks that have a history of steady growth to further reduce your risk.”

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