MoneyWalk 161 Diversification of Assets
This program will help you undo financial bondage.
When you put all money in one investment account you take the great risk of losing all of it if (a) the investment loses all its value, or (b) the holder thereof goes bankrupt and did not put your money in a segmented account, or (c) you mistakenly invest with a scam artist running a Ponzi scheme.
These types of things happen from time to time in good and bad economic cycles. Diversifying assets helps protect your portfolio from massive and total loss when such things occur. Even though your assets may not earn as much as one particular investment could have earned during a certain period of time, the upside is you don’t have to worry about one bad apple spoiling the whole bunch, nor all eggs being broken if you happen to drop the basket.
Reasonable asset allocation and diversification reduce risk of loss on investment portfolios while at the same time allowing very good growth during long-term investment horizons (generally ten consecutive years or more). You should seriously consider spreading assets commensurately among different types of investments (no load stock and bond index mutual funds, real estate investment trusts, stable value funds, investment real estate, etc.) in order to obtain great benefits.
When you start investing aim at progressively establishing several different investment accounts and types of investments for needed financial safety and stability throughout the various economic cycles you will encounter in life. Make sure the financial institutions and brokers are licensed in good standing with state and federal securities regulatory agencies and are reputable.
You may want to use a simple method for diversifying assets like dividing investments into stock mutual funds or equity-based investments in a percentage representing one-hundred minus your age and then putting the other portion (a percentage representing your age) in bond or fixed-income investments. Or, you could equally fund each type of instrument. No matter your age, when financially uneducated or you need to live off a high percentage of investments or you cannot tolerate the risk of losing any money, then put it in several government guaranteed fixed-income investments. Do this until you are educated on the various types of investments available and you are comfortable you can invest money with a long-term horizon without buying investments at high prices when economic times are good and selling them at lower prices when times are bad. Don’t invite scam artists and irresponsible investment behavior into your life and finances by trying to get high rates of return while not understanding things you invest in and not knowing how to pick reputable brokers and financial advisors to help manage money.
Again, the principle of diversification provides greater safety from total loss while rewarding you over the long term with a very reasonable opportunity for meaningful growth of your investments.
Genesis 13:2, Job 42:12, Proverbs 15:22, Proverbs 24:6, Ecclesiastes 11:1-2
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