Sean Casterline

How to Diversify Your Investment Portfolio

 Sean Donovan Casterline

Sean Donovan Casterline

investment advisor creating portfolio
When the market is thriving, the idea of growing your investments seems easy. All your stocks can usually sell for at least the amount you paid for them. But as the market has shown us recently, it is not always a time of bounding growth and easy returns. 2022 has progressed on shaky ground, and analysts say it will remain that way through the rest of the year. This is why diversifying your portfolio could bring some strength to your investments. This article provides four key tips to help you figure out a plan based on diversification. Diversifying could be the key you need to help weather the storm of the current market.

1. Never Put All Your Investments in One Sector

This tip sounds straightforward, but it is worth emphasizing. The idea of diversification is simple: spread out investments in multiple key areas so they can better tolerate risk and volatility. This does not mean that you diversify by putting all your investment money in one area. This is not diversifying a portfolio! Instead, learn to understand many areas of the market. Consult a financial advisor to help you. They can connect you to the best options that remain cohesive with your approach and risk tolerance.

2. Consider Dollar-Cost Averaging Over Time

One misstep many investors make is to place a certain threshold or amount and cease contributing more to that particular area. Depending on the investment, this could be negatively impacting your return potential. You’re used to hearing the adage “buy low, sell high.” Of course, that is worthwhile advice at its heart. But the truth is that no one really knows when the low or high points hit within a volatile market. One way to lower overall risk in this scenario is to proceed with a strategy known as dollar-cost averaging. In short, investors spread out the purchase of the investment over time, regardless of the price of purchase at each interval. While this may seem counterintuitive at first glance, it is an effective method to steady out investments during volatile market times (such as right now).

3. Don’t Drop the Ball on Your Portfolio

Buying and holding is one way to stay afloat in a rough market. And in many cases, it’s an effective strategy. The same goes for dollar-cost averaging. However, this should not suggest that you simply buy into your investments and let the market take care of the rest. Keep a regular eye on your investments, trends, and related news. The market can change rapidly, so there may be times when the prudent move is to sell. Again, don’t act impulsively or emotionally in these decisions. Instead, make sure you’re checking up on what you have and adjusting based on how much risk you are comfortable with.

4. Get the Help You Need to Meet Your Diversification Goals

The market is tricky, and diversifying into areas you are not familiar or comfortable with is no easy feat. This is why it is so critical to speak with a financial advisor about your strategy. Their knowledge and expertise can help connect your approach to all the important components of your money. This includes your risk tolerance, analysis of the market, and when to make important changes. Working with a professional is one of the most important ways to feel in control with your investing. Ensure that you partner with a trusted advisor to keep ahead of the waves – especially during uncertain times like right now.