5 Tips to Diversify Your Portfolio

FinanceFeeds Editorial Team

Diversification is a popular investment strategy that has been used for decades by many investors of the calibre of Warren Buffet. Traders and investors take advantage of diversification because it reduces the risk of a portfolio and maximizes its returns.

When it comes to adopting a diversification strategy, you want to select a set of instruments that carry different degrees of risk and belong to a variety of industries and markets. In fact, one of the mistakes that beginner investors often make is to allocate all their resources in one single instrument or one industry.

By diversifying your portfolio, instead, you will be allocating your capital in a variety of instruments that keeps the risk under control and offers exposure to high-return opportunities. Thus it is important to find a broker that provides you with a broad range of instruments for diversifying your portfolio.

5 Tips to diversify your portfolio

Define the proportions

When it comes to composing your portfolio, you want to allocate a percentage of your capital to each type of instrument in accordance with your risk tolerance.

Pick a good variety of industries and market

Even if you know a market particularly well, you are better off not putting all your eggs in one basket. Instead, select instruments that fall into different types of industries not to be overexposed to the destiny of a specific industry.

Keep a manageable portfolio

Although there is not the perfect number of instruments to hold in your portfolio, it is critical not to exaggerate and trade assets that you can keep track of and manage.

Rebalance your portfolio systematically

Along the way, you will need to go back and adjust your strategy, according to your initial plan and maintain the proportions in order not to be overexposed or underexposed to specific instruments.

Be unbiased

When investing, don’t let your feelings get in the way of your trades as this can cost you money or, even worse, can blind you to emerging opportunities. Thus, be aware of your preconceived idea and try to be unbiased toward an asset class or an industry.

To conclude, composing a diversified portfolio requires strategy and lucid analysis. Nonetheless, it is one of the most important aspects of being successful in the financial market.

Regardless of the market, you want to invest your capital in, CedarFX offers over 190+ tradable assets that will suit your preferences.

You can choose between established instruments such as indices, precious metals and stocks. With a minimum deposit of only $10, you can open an account and trade with leverage of up to 1:500.

Start your journey with CedarFX here.

Read this next

Digital Assets

FINMA-regulated digital asset provider Taurus expands into Germany

This expansion follows recent moves by BaFin to accelerate the licensing of crypto custody services, aiming to boost market confidence. Following this, several new licenses were issued, notably to Commerzbank, making it the first full-service financial institution in Germany to receive a crypto custody license.

Inside View

Stocknet’s Nick Hall defends gamification as trading platform market set to hit $15.34b by 2030

“The growing popularity of gamified trading has the potential to tackle this financial literacy gap. Rather than simply giving users unfettered access to markets and letting them figure things out for themselves, platforms can offer virtual skill games and challenges to help educate traders and prime them for success.”

Inside View

Infographic: Interest rate and FX derivatives are driving rise of OTC derivatives market

These trends suggest a growing and evolving OTC derivatives market, with an increased focus on risk management and regulatory compliance. The rise in clearing rates, along with the increased initial margin requirements, reflects a more cautious approach to risk in the financial services industry.

Market News

Bank of Canada’s Final 2023 Policy Update on the Canadian Dollar and Future Monetary Landscape

The Bank of Canada’s final policy update for 2023, as reported by Bloomberg, had a relatively subdued impact on the performance of the Canadian dollar, especially when compared to the discernible market reactions following prior BoC policy decisions throughout the year.

Inside View

DTCC’s Systemic Risk Barometer Survey found 2024 US Presidential Election as a top risk

U.S. political uncertainty, particularly regarding the 2024 Presidential Election, has emerged as a key risk, with 51% of respondents highlighting it as a major concern. This reflects the potential impact of election outcomes on market conditions and the industry.

Executive Moves

Options Technology promotes Laura McCann to CFO

“Laura’s promotion to CFO is the next stage in our long-term strategy of building a world-class finance team servicing the global business from our Belfast office. Back in 2016, Jon took on the challenge of laying the groundwork for that vision. Laura has been an integral part of the strategy from day one.”

Digital Assets

Thailand’s crypto economy under the spotlight: a report by HashKey Capital

“I’m excited by the rapid expansion of Thailand’s Web3 sector. With over 3 million overall crypto users and 600% growth in the market in recent years, the dynamism in our DeFi and NFT sectors is clearly evident. Thailand is increasingly becoming a hotspot for digital nomads, drawn by our crypto-friendly policies, affordable living costs, vibrant food and beverage culture and diverse cultural landscape.”

Retail FX

Webull Australia offers 5.4% yield on uninvested cash

“US dollar money market funds are heavily regulated, meaning client funds are managed in a safe, reliable and trusted environment, which is of critical importance to us, and continues to remain top-of-mind for our clients.”

Digital Assets

Bybit welcomes Ethena’s USDe, a decentralized stablecoin utilizing delta-hedging staked Ether

“Our collaboration with Ethena Labs represents our commitment to solving some of the biggest challenges in crypto today, not least, the creation of a decentralized stablecoin. The integration of USDe on Bybit expands our stablecoin offerings, providing our users with an array of uncorrelated solutions accessible from our Unified Trading Account.”