Why is Diversification Important?

American Investment Planners LLC

500 North Broadway, Suite 260, Jericho, NY 11753

(516) 932-5130 / (866) 932-5130

Investing is a financial strategy that many people choose to help them achieve their short and long term goals, and the people who experience great success with doing so don't just become pros over night - there's a lot of research to be done and a lot to understand about the process, especially when it comes to risk.

Put simply, nearly every investment out there has some kind of risk associated with it - this is only natural, as the stock market rises and falls all the time. With that said, regardless of what you decide to invest in, you have to consider what kinds of risks are associated with that investment in particular.

This is where diversification comes in. In order to be a successful investor, you must be able to manage your risk while also maintaining your potential to experience returns. To do so, one thing that is often recommended is to diversify.

Ultimately, diversification is an investment strategy that is geared towards managing risk by spreading your money across various investments, such as stocks, bonds, real estate and cash alternatives. By having a diverse portfolio, you aren't putting all of your eggs in one basket, which helps in situations where you experience loss in a particular investment.

So why is diversification important?

Overall, diversification really helps to offset any negative experiences you have with any one investment. For example, if you have one investment that decreases really quickly but another that increases at the same rate, you'll likely have much more peace of mind and you may not even be too impacted by the decrease if another investment improves significantly. Additionally, having a diverse portfolio really helps in riding out market fluctuations, and can provide you with a more steady performance regardless of the current economic conditions.

With all that said, no matter where or how you choose to invest your money, we think it's important that you always keep diversification in mind - at the very least, it will probably make you feel much more comfortable with your efforts!

Here at American Investment Planners LLC, we are staffed with some of the top investing professionals and would love to work with you on your portfolio to ensure it's designed to meet your financial goals. To set up an appointment with an advisor, please call (516) 932-5130 or email info@americaninvestmentplanners.com today.

Above information courtesy of Emerald Connect.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not ensure against market risk.