If you work in the tech sector, you probably have a fair bit of your money invested in your employer’s share plan. And that’s great! Employee share plans are a great way to save for retirement and build wealth. But it’s important to remember that no single investment is a sure thing. That’s why it’s important to diversify your portfolio.
Diversification is the process of spreading your money across different asset classes, industries, and geographic regions. This helps to reduce your risk by minimizing your exposure to any one investment.
For example, let’s say you have all your money invested in your employer’s share plan. If the company goes bankrupt, you could lose everything. But if you had diversified your portfolio, you would have some of your money invested in other companies, and you would not have lost everything.
There are several ways to diversify your portfolio. You can invest in different types of investments, such as shares, bonds, and property. You can also invest in different industries, such as technology, healthcare, and consumer staples. And you can invest in different geographic regions, such as Australia, the US, and Europe.
The amount of diversification you need will depend on your individual circumstances and risk tolerance. But if you’re serious about building wealth, it’s important to have a diversified portfolio.
Here are some of the benefits of diversification:
- Reduces risk: As mentioned earlier, diversification helps to reduce your risk by minimizing your exposure to any one investment.
- Increases potential returns: A diversified portfolio is more likely to generate higher returns over the long term than a portfolio that is concentrated in a single asset class or industry.
- Makes it easier to stick to your investment plan: When you have a diversified portfolio, you’re less likely to make emotional investment decisions based on the performance of a single investment.
If you’re not sure how to diversify your portfolio, you can speak to a financial advisor. They can help you create a portfolio that is right for you and your goals.
So, there you have it. Diversification is the key to a healthy investment portfolio. If you want to build wealth and reduce your risk, get in touch for confidential and obligation free discussion with Mission Wealth.