Do you think you have a diversified portfolio? Ask yourself these four questions to find out…

Julie Brownlee, Fsp Invest, 01 Dec. 2014

Tags: investing, diversification, diversified portfolio, how to invest in stock, portfolio review,

When you buy shares, you need to ensure you do your homework and satisfy yourself that they measure up to your expectations.

It’s vital you spread your money across a number of different types of shares. Otherwise you’re increasing your investment risk.

So how can you check how your portfolio measures up?

Read on to find out…

Picking stocks to invest in

Before you part with a cent, you should believe you’re investing in a great stock. You shouldn’t have any doubts. And you shouldn’t hope that luck will make your investment turn out right in the end.

One thing you can do is look for a unique attribute that a share can add to your existing portfolio. In other words, complement what you already have.

What does a stock bring to your portfolio?

Whether you’re looking to invest in a share or looking at the shares you already own, ask yourself these four questions…

  1. What unique attributes does a share bring to your overall portfolio?
  2. Does it give you exposure to developed markets?
  3. Does it give you exposure to resources, such as energy or commodities?
  4. Does it hedge against rand risk or interest rate risk?

Before investing, or while conducting a portfolio review, ask yourself these questions.

When constructing your own portfolio, without even realising it, you can invest in stocks that are all very similar. And this means they’ll react to the same financial environmental factors.

Just because you own 20 different stocks doesn’t mean you have a diversified portfolio.

And if you don’t take the time at least once a year to review your portfolio, make sure you do.

So there you have it, four questions to ask yourself to find out if you have a diversified portfolio.

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