Sep 21, 2017 2 min read

Try choosing different roads to your investments

Never keep all your eggs in one Basket.
Have you ever wondered why it happens, most enthusiastic, fresh investors end up with their investment journey without reaching to any destination? Well it is right to believe that no straight roads will take you to the peak of the mountain. Big destinations come only with diversified roads.

The same is true with the Mutual fund investment, if you as an investor are planning high peaks of profits, then never choose a single straight path, try diversifying your investment strategy. Whether it is a fresh start or you are already in investment world, here are a few things for you to check out while planning the next investment:

Never ever have a centralized investment portfolio. Try diversifying your investments to make it more omnipresent. The wise men advice” Never put your money in a single pocket”. As a fresh investor you may be tempted not to invest in more than one scheme to initiate. But if the market does not show a favorable color, the market volatility would lead to the entire capital loss. But if you deploy your capital in a diversified manner into multiple schemes, the probability of getting better and secured returns increases. Be the clever investor and spread your risk.

Were you thinking the other way out?

There is a common misconception about diversification of funds. We believe diversification is when the fund invested is deployed into the capital of various companies under the different sectors. It may be true but not in terms of ‘portfolio diversification.’ Spread your total capital into different funds so that you make a safe investment.

Here are the two best suggested ways which can be utilized by all types of investors to diversify their portfolio in the best way:

  1. Sectoral : Try not to invest in the funds which belong to the same sector. Such investments may lead to significant losses at the time of deflation of that particular sector. Therefore, try to allocate your money in the funds of different industries. For instance, if you have invested all your money in the stocks of pharmacy sector companies, there is a risk that you may end up in a big loss if pharmacy witnesses any downfall.
  2. Category : Mutual funds investment plan can be classified into a number of categories, but the major three are debt, equity, and hybrid. To attain a proper diversification, you must park your money into different types so that the overall portfolio will earn steady returns. For instance, if you invest all your savings into equity, you will not be able to enjoy the liquidity of debt funds. Furthermore, stocks are known for long-term investment, so you may fall short of money in case of an emergency which can be handled efficiently with debt investments.

Having a well-diversified portfolio will always let you earn adequate returns on your investments. Read more on our blog MySIPonline to know about the other fundamentals of investing in mutual funds.