3 Keys to Diversify for Profitable Investing

3 Keys to Diversify for Profitable Investing

 

Diversifying your portfolio or retirement account is often based on your age.  Yet a good profitable investment plan should be based on a number of factors.  These three keys for diversifying for profitable investing will make it easier for you to manage and grow your account.

3 keys to diversification for profitable investing

TERM – how long do you prefer or expect to hold a position:  long-term, short-term, or mid-term?  If you are a daily trader you can eliminate most long-term positions.  On the other hand, if you will trade once a week or just monthly (like me), then most of your positions will be mid-term to long-term.

TYPE – Where are you going to put your money?  Splitting your positions between stocks, ETFs and mutual funds will automatically diversify your portfolio or retirement account.  Why?  Because by putting some of your cash into ETFs or funds you are further diversifying.  Remember, ETFs and funds are composed of many individual stocks of a similar nature (i.e. utilities or large corporations).

SAFETY – you can improve the safety of your portfolio by investing in six to eight different groups or types of investments.  This can be done with either mutual funds, ETFs or stocks.  Some typical investment groups or categories include:

  • High dividend payers
  • Bonds
  • Select different industry categories (i.e. finance)
  • Asset strength (i.e. mid-cap)
  • Foreign

By first diversifying your retirement account or portfolio based on these three keys you will align your investments according to your own objectives, not some generalized objective based on how old you are.

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