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How To Find The Right Diversification Strategy

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How To Find The Right Diversification Strategy. The personal strategy for diversification is based primarily on two aspects, namely the risk profile and the available investment amount. In principle, you should only ever invest the money that you can spare in everyday life. There is no point in closing accounts overnight (often with high losses) because you suddenly need cash.

There are indeed overnight money accounts for customers who want exactly this option, but the return on this is hardly worth mentioning and often no longer even covers the inflation rate

In principle, you can of course also sell stocks and other listed values ​​on a daily basis – but those who do that have to live with the respective daily price, which can of course be below the cost price.

How high the amount to be invested should not necessarily depend on what you have “on the high edge”, but rather on what you can actually let work for you over a longer time.

No matter how secure an investment may be, one should never speculate with borrowed money. Taking out a loan to buy shares is not recommended, especially since the return would be reduced by the interest to be paid anyway and thus often makes no sense from the outset.

The risk profile does not only result from the investor’s willingness to take risks, which may be subjectively higher than it should be objectively. Rather, it should, in the best case, be based on what the investor must expect in case of doubt if the investment should be lost.

If it is a large sum, which represents the total savings of a lifetime, you do not have to forego a lucrative investment. However, you should consider beforehand whether you can cope with the potential loss – and choose low-risk investments if necessary.
Diversification helps to build efficient portfolios of risk-free and risky securities in order to achieve a meaningful return on balance.

How To Find The Right Diversification Strategy

Assess and plan investments correctly

  • Determine and observe your own risk profile and that of the investment
  • Specify the investment amount precisely
  • Coordinate desired return with risk and liquidity
  • Never speculate with borrowed money
  • Never neglect risk diversification, even with tempting offers.

Naturally, it is not easy to determine exactly which products are the right ones for your own type of plant. Funds can help here because they already spread the risk. But of course, there are also different risks within fund investments. So you shouldn’t get into a real estate fund when a real estate bubble is bursting.

Conversely, it is also questionable whether entering the gold market is worthwhile when the price has just reached a record high. The art of investing and diversifying lies in correctly assessing the impact of events.

How To Find The Right Diversification Strategy

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