Best Ways To Diversify Your Investment

Your investment portfolio should have an optimal balance of liquid assets and those that can deliver max gains in the long-term

Just like a balanced diet, your investment should also have a similar profile. As proteins, carbs, fats and vitamins are all necessary for the body, your financial well-being will need a mix of stocks, bonds, FDs, gold, cash, etc. For better understanding, let us take a look at the best ways to diversify your investment.

Identify industries with high growth potential

Investment in equity stocks can be profitable. Even more so if you choose the right stocks. You can look at a 5-to-10-year horizon to understand which stocks have high potential for growth. For example, in a developing country like India, infrastructure development is ongoing in a big way. So, cement and iron and steel companies will be a suitable bet. Similarly, you can look at investing in construction and engineering companies, industrial equipment manufacturers, etc.

In a developing country, the real estate sector also holds great promise. You can invest in real estate and urban development companies, along with other entities such as utility and energy companies. With economic growth, banking and insurance sector stocks are also good options.

Consider emerging industries

When it comes to diversifying your portfolio, you should also look at relatively newer industries that are registering strong growth. The world is forever changing and the rate of evolution has increased significantly over the past few decades. If you read the news, you can see that entirely new business ideas are evolving. Investing in stocks of related companies can be a good decision. For example, stocks of renewable energy companies and equipment manufacturers can be a good choice. In the automotive space, we see the rise of EVs and hybrid cars. A part of your funds can be invested in these companies as well.

Add Mutual funds

You can choose mutual fund options that suit your risk appetite. You can choose a lump sum amount or invest via a SIP. Some options you can consider include Nippon India Small Cap Fund, ICICI Prudential BHARAT 22 FOF Fund, Motilal Oswal Midcap Fund, LIC MF Infrastructure Fund, Kotak Infrastructure and Economic Reform Fund, Bandhan Tax Advantage (ELSS) Fund, JM Flexicap Fund, Nippon India Multi Cap Fund, Motilal Oswal Large and Midcap Fund, HDFC Focused 30 Funds and SBI Long Term Equity Fund.

Create a safety net

As seen in the past, the world can see catastrophic events all of a sudden. Such events can adversely impact the stock markets. Even you and your family can face emergency situations. You will need a stronger safety net during these times. It can come via traditional investment options such as fixed deposits, adequate cash in the bank, government bonds, gold and precious metals, real estate investments, National Savings Schemes (NSC), etc. So, ensure that your portfolio has an optimal mix of these investments as well.

Review and update your portfolio

Last but not least, you need to keep updating your investments at regular intervals. You can exit investments that are not delivering the desired results. Also, you can add new investments based on emerging industry or economic indicators.