Mistakes to Avoid When Diversifying Investment Portfolio

Dubai, UAE – ARAB NEWSWIRE - Growing wealth over time can be tricky and might require an investor to adopt different financial strategies that align with his/her wealth goals. Among the various other wealth-building factors, one of the most important ones that an investor can consider incorporating is the diversification of the investment portfolio.

However, diversifying an investment portfolio can be a task, especially for people who are new to investing. One might face challenges such as identifying the right assets to invest in, how much to invest, when to invest, and so on. To tackle such limitations, one can take the help of any reputed bank or financial firm that provides comprehensive wealth management services and helps in creating a portfolio. However, while creating it, one may also want to avoid some of the common mistakes that are listed below.

Being Too Diversified or Not Diversified Enough

 

If an investor purchases excessive shares of only one sector/industry, then it might hurt his/her stock portfolio. One can avoid such mistakes by investing in different sectors or in Mutual Funds and ETFs as they invest in stocks from different companies. However, if an investor wants to purchase individual stocks, then investing in a manageable number of stocks in varied sectors rather than just in one sector can help diversify the portfolio. 

 

Failing to Diversify Geographically

When it comes to investment diversification, apart from asset allocation, one can also focus on asset location. It is not unusual to be more inclined towards companies in your home country, as one tends to be more familiar with them. However, if investors want to take advantage of the growing economies globally, then diversifying the portfolio geographically may yield potential high returns. It can also help investors get more exposure to foreign markets.

 

Assuming Diversification as a One-time Activity

Investment diversification ideally should not be taken as a one-time activity. Timely checking and rebalancing the portfolio can be rewarding to investors. As market trends keep fluctuating, the current asset prices may also change and may not align with the investor's financial goals. So, it is important to regularly track the investments to ensure that they meet the requirements. You may also want to check whether they offer a balanced mix of risks and returns.

Not Looking Beyond Conventional Investments

Apart from investing only in stocks and bonds, one can also consider investing in alternative investments. Some examples of alternative investments are real estate or REITs, commodities such as gold and silver, antiques, art, etc. While returns from most conventional investments are heavily dependent on the market trends, not all alternative investments are affected negatively by market volatility. As a result, alternative investments may yield potential good results.

 

Conclusion

 

Avoiding common mistakes when diversifying an investment portfolio may prove to be quite beneficial for investors in the long run. However, if one has time constraints, then taking note of every development or trend in the market might seem challenging. In such situations, one can opt to take the assistance of a wealth management solutions provider in the UAE. For instance, one can have a look at the premier wealth management services, wherein each investor gets a dedicated team of financial experts. With the professional assistance, investors can create a diversified portfolio and steer away from the common investing mistakes.

 

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