Paying Closer Attention To My Financial Statements

Diversification: Why It's More Than A Wealth Management Buzzword

30 May 2017

Barb Morgan

When you first begin investing, you hear a lot of the word "diversify" or "diversification". Why would anyone from a wealth management company encourage you to diversify? Is it just a buzzword in the investment world? For anyone just getting started with investments and attempting to make their wealth grow, you may be be inclined to ignore diversification, but you would be amiss to do so. Here is why the word is not an investment buzzword, and why a wealth management company wants to help you diversify.

Safe Investing in One or Two Types of Products Isn't Really "Safe"

The whole point to diversification is to avoid investing in any one product that could take all of your money from you if it fails. For example, you could invest entirely in junk bonds, a type of get-rich-quick investment that promises high yields. If you put ALL of your money into junk bonds, you could make a ton of money quickly. You could also lose everything you have if the venture fails. Even if you split your money between junk bonds and stocks, you could still end up losing most of your investment capital.

Diversifying puts that money into more than two types of investments, some with higher risks and some with lower risks. This way, you can be assured of getting more of your money back if some of your ventures fail. The old adage of "never put all your eggs in one basket" actually has its origins in wealth management advice and fits this example perfectly.

Diversifying Is SMART Investing

Diversifying is investing with intelligence and placing some of your proverbial eggs in several tried and true baskets with the goal of making more money, not less. When you do not know how to diversify, you get help and advice from wealth management groups. Then you know what percentage of your investment capital you should place in each "basket" to get the best results. This is the biggest reason why diversification/diversifying is not a buzzword, but something you should absolutely pay attention to and do often.

When You Hire a Wealth Management Company, Everybody Gets Wealthy

Hiring a wealth management company to help you invest and diversify helps everyone get a little wealthier. The agent takes a small percentage of each successful investment he or she helps you make. You make a lot of money, while your agent makes a little too. 

For additional insight, you will want to check out a website such as http://trajanwealth.com/.

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