When it comes to investing, we always recommend that our clients go for variety, not quantity.
Having a lot of investments does not allow you to diversify, which will safeguard your financial future. To diversify, you need to have different types of investments. This means you should have one of the following: stocks, bonds real estate funds, international securities, and cash.
Investments in each of these different asset classes have different effects.
For example, stocks help your portfolio grow, while bonds have the benefit of helping to provide income.
International investments promote growth and help growth and help maintain purchasing power in an increasingly globalized world. Cash provides security and stability to your portfolio.
How do you allocate your money and how do you calculate how much money to put into each investment category? Plan for enough money and income to handle emergencies and short-term goals.
Diversification within investment categories
It’s not enough to buy one stock, for example, you need to have different types of securities in that part of your portfolio.
The diversification when buying individual stocks can be costly, because you you pay a trading fee each time you buy different stocks. The most cost-effective way for investors of modest means (i.e., for people with less than $250,000 to play with) is to buy mutual funds.
Mutual funds are investment pools that combine the money of many people to buy stocks, bonds, real estate, international securities, etc.