What Is Diversification?
Diversification is the act of spreading your money through different assets to assure that you will not lose all of your money if one of your investments goes wrong. These assets can for instance be stocks, cryptocurrencies, crowdlending, a Shopify business, or whatever comes to your mind that can turn into a business!
When thinking about which of those places you want to put your money in, you should always study as best as possible all the possible outcomes.
There’s no point in leaving your money rotting in the bank with taxes lower than 1%, no matter how safe it may seem. It is also non-sense to spread your money into stocks if you have no knowledge of it. You should ALWAYS invest your money in something you understand and TRUST. Do not make the same mistakes I did. If you’ve already done them, it’s ok, simply keep the right mindset and you’ll achieve your dreams as well.
How Can You Diversify In A Sustainable Manner?
In case you’re still wondering that banks are safer and that you don’t feel like risking, I’ll give you one example that happened in my country, Portugal. There was a bank called Banco Espírito Santo which seemed to be a trustworthy and good bank. Guess what happened? It went bankrupt due to the misconduct of its owners and thousands of people lost their savings of a lifetime!
If they had diversified before, the damages to their lives wouldn’t be so huge. Sure, they would still have lost some amount, but at least not everything.
Also notice that by reinvesting the returns from these investments, you’ll have another great “power” helping you out: the famous compound interest. In my case, I’ll need 10 years, give it or take it, to be financially free.
Calculate your deadline if you’re also curious by using this compound interest calculator.
Why Is Diversification So Important?
Diversification is crucial if you don’t want to lose all of your money at once. As safe as one company may seem, history has proven that it is not safe to keep all of your savings in one place. Yet, this is what most people do.
I truly hope you took some value from this post and understood that it is of great importance to diversify your portfolio.
I told you about my investments since it is what I understand minimally and feel comfortable speaking about.
Nonetheless, the time has taught me that things change…a lot. But as long as you’re familiar with the diversification concept, and you don’t get greedy, you should be fine!
If you hadn’t before, start today your journey to financial freedom with me. If others can, so do we.
How Am I Diversifying My Portfolio?
Read the list of books that are helping me have the right mindset by clicking here.