I try to as always incorporate new things that can spice up this financial blog such as including webinars of past posts through my Youtube channel. If you want to subscribe click here) and creating posts based on Filipino financial terms such as paluwagan and 5/6.In addition to the above I decided to create a series posts and as a premier I will be posting the Top 10 Most Important Lessons to Learn in Personal Finance.
#4 Diversify and Aim High
As much as possible, diversify your investments.
Diversification is a financial technique that reduce the risk factor of investing by allocating your investments on different financial vehicles, industries, institutions or other varied categories.
The aim of diversification is to help an investor maximize the return by investing in different areas that could possibly react differently to the changing movement of the economy. Although it never guarantees that loss will be diminished, diversification will surely minimize this sad effect on your investments on a long run.
Application
If you directly invest in stocks in just one company let's say Company ABC for it is performing at its peak during your time of investment and after a year the said company experienced financial problems that led to strike by its employees and a indefinite closure, all shares from Company ABC will surely drop.
You will feel this effect on your stock portfolio wherein second by second your investments will drop.
But if you diversify and put some of your investments in companies that are on a sector different than that of Company ABC , you'll still have a chance to recover.
How to Apply Diversification in Your Investment Portfolio
You can easily diversify if first and foremost your have an idea how to invest. If this will be your first time then I highly suggest you read first this blog post of mine called, How to Worry-Free Invest in the Philippines.
Now that you are set and ready determine your investors profile. Are you someone who are in investing for just 1-3 years? 5-0 years? or more than 10 years? How much are you willing to invest? How well do you know this investment vehicle?!
Diversify among different financial vehicles, assets such as bonds and stocks and market values. Do not just put your money on a time deposit account but aim high to have your other money on mutual funds, stock market or even a real-estate property.
The key thing is you need to know whether your diversification helps you in attaining your financial goals. You'll know when is too much naman because we are talking about your hard-earned money.
Remember Henry Sy?! He opened Shoe Market as the leading mall in the Philippines but he didn't stop there. He established the SM Group with real estate, bank and now even a school, National University. The man knows how to diversify and it can be seen on how well the SM is performing.
Same with the Ayalas and Manny Pangilinan himself.
DIVERSIFY and Aim High.
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