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

Retail FX

Italian watchdog red flags Olympus Brokers, UnicoFX and Allfina Group

Italy’s Commissione Nazionale per le Società e la Borsa (CONSOB) has shut down new websites in an ongoing clampdown against firms it accuses of illegally promoting investment products in the country.

Retail FX

XTB revenues hits zł1.45 billion in 2022, Q4 earnings disappoint

Poland-based Forex and CFDs broker, XTB has reported its final results for Q4 of 2022 and the full fiscal year ending on December 31, 2022, showing one of its most successful corporate years.

Executive Moves

Lirunex Limited recruits Waleed Salah as head of MENA sales

Maldives-based brokerage firm Lirunex Limited has secured the services of Waleed Salah, who joined the company in the role of its head of sales for the MENA region.

Executive Moves

Trading 212 parts ways with co-founder Borislav Nedialkov

Trading 212 has a void to fill at its FCA-regulated business in London, following the departure of two key players, Raj Somal and Borislav Nedialkov.

Digital Assets

Binance acquires troubled crypto exchange GOPAX

Binance, the world’s largest digital asset trading platform, has reportedly acquired a majority stake in the troubled South Korea-based cryptocurrency exchange GOPAX.

Digital Assets

Kraken exits Middle East, closes UAE office

Digital currency exchange Kraken will close down its operations in Abu Dhabi, UAE and lay off the majority of its team focused on the Middle East and North Africa.

Industry News

CFTC comments on ION Cleared Derivatives issues after Russian-linked hack

“The ongoing issue is impacting some clearing members’ ability to provide the CFTC with timely and accurate data. As this incident unfolded, it became clear that the submission of data that is required by registrants will be delayed until the trading issues are resolved.”

Industry News

FCA took down 14 times more misleading ads in 2022 thanks to technology

The FCA has made significant improvements to the digital tools it uses to find problem firms and misleading adverts. These improvements have enabled it to work through a much larger number of cases compared with 2021.

Executive Moves

HKEX appoints ex-Goldman Sachs Matthew Cheong to lead platform’s focus on derivatives

“He has worked for a number of the world’s leading investment banks and his experience will be invaluable to HKEX as we continue to enhance our derivatives product offerings and build on our innovative and robust platform business, connecting capital with opportunities.”

<