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Mistakes many investors make when they try to diversify

Diversification is something that is really important for every single investor out there. It is a huge part of growth and it is always necessary to make smart decisions. Making that smart decision starts with avoiding the really common mistakes that will be highlighted below. Be sure to avoid them at all costs.
Making too many investments

Many will tell you that a big problem for beginner investors is that they do not make enough investments. When looking at diversifying the portfolio a common mistake is making too many investments. Holdings have to be kept down to manageable investment numbers. As a rule of thumb, nobody should go over 30 in amounts that are reasonable. When an opportunity arrives you can increase amounts for the investment that generates more income, like with the packaging portfolio for Mondi.

Long-term commodities exposure

You should invest in commodities, not own them. There is no successful commodity investor out there. However, the commodity traders are really good as they are comfortable in bear market selling or bull market buying. Spotting opportunities and not being compelled to invest in everything is what you should be at. As you hold trade vehicles, wealth is not built over time.

Focusing on foreign stocks and funds

Foreign stock investments tend to perform in a poor way. Owning large US stocks means that exposure to many overseas economies already happens. Investing in the foreign stocks means you need to have insider information about those stocks. This is something that is not possible for most of the traders out there. That is why it is normally a lot better to focus on the domestic funds and stocks as information is much more widely available.

Focusing on market cap when diversifying

The large and the small caps are always going to fall and rise together. You should not focus on a total market cap. Your aim is to find a business that is strong and then invest in it.

High-fee and illiquid investments

Nontraded REITs and hedge funds are highly preferred for tout diversification investors. However, these are not going to perform that great on the long term. As you try to diversify, try to avoid these as the profits you will make are going to be highly volatile.

Diversifying properly

Inappropriate diversification is definitely something that you have to avoid but how do you properly diversify. Do you go for platforms like Motif and do it yourself or do you let others do the work for you? At the end of the day the choice is up to you but what is really important is to keep getting the knowledge that you need to keep growing that investment portfolio you have.

The good news is that it is not at all difficult to diversify the portfolio in a good way. You just have to keep learning. Make sure that the growth is as gradual as it has to be, failure to do this would lead towards making serious mistakes.

15 Aug 2016 14:17

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About Boris Dzhingarov

Boris Dzhingarov graduated UNWE with a major in marketing. He is the CEO of ESBO ltd brand mentioning agency. He writes for several online sites such as Tech.co, Semrush.com, Tweakyourbiz.com, Socialnomics.net. Boris is the founder of MonetaryLibrary.com and cryptoext.com.




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