Why diversification is important in investing
Famed billionaire and master investor Warren Buffett has been known to advise investors to put their investment “eggs” in multiple baskets. That way, if a crisis hits one basket, the eggs only break in that one. And the rest of your eggs in the other baskets stay safely intact.
In other words, if you’ve invested all your funds in a single stock, if that stock value plummets, you’ve lost everything. But, if you’ve invested in a diverse selection of stocks, you are more likely to weather the ups and downs of the stock market. To take it even further, investing in multiple and diverse investment avenues, like stocks, cryptocurrency, real estate, and other “baskets,” gives you a better chance of recovering from any single investment’s losses and a good chance of gains from the various investments.
Most financial experts agree that diversification reduces risk by spreading investments across investment platforms, industries, and other categories. Losses are lessened when funds are allocated in different places that react differently to economic events.
“Although it does not guarantee against loss, diversifying your investment portfolio is the best way to reach your wealth goals while minimizing risk,” says Ivel Turner, CEO and founder of Oasis Realty Investment Group, a national investment firm that focuses on real estate investment funds.
“Any investor who focuses solely on one investment outlet is more sensitive to risk than one who diversifies their investments,” he says. In fact, Turner explains that it is smart to diversify even inside a single investment interest, like real estate. By investing in real estate funds, which invest in various and diverse real estate projects throughout the country, investors are more likely to offset losses and make gains in real estate, Turner says.
To reiterate, the more diversified an investor’s portfolio is, the more resilient it is to risk. This is especially important for investors who nearing the end of their professional careers and looking to safely grow and preserve their wealth. And for those no longer working and fully settled into retirement, a diversified portfolio is vital to balancing risk over returns.
While investors may have the chance to make more money when betting on bigger risks, balancing those risks out with safer investments makes for a smarter and more stable investment portfolio.
As master investor and philanthropist Peter Lynch says, the secret to investing is that diversifying is more likely to mean that some investments will “do mediocre, some will do okay, and if one or two of ‘em go up bigtime, you produce a fabulous result.”
For more information on how you can diversify your investment portfolio with real estate investment funds, contact Oasis today.