Smart Investments Involve Diversification and Informed Decision-Making

It’s always advisable: don’t put all your eggs in one basket. Smart investing is all about growth through diversification and informed decision-making.

When one asset class loses its steam, you need to reap the benefits of another asset doing relatively better. What barges most people, those who are already in the business world and those who wish/want to invest is what kind of business to venture into, what it takes to manage money, which assets to buy and sell, what to do in a market correction, how to single out which stocks to buy and sell, when to adjust the portfolio, how to avoid costly mistakes and should someone be paid to manage their money?

Smart investing isn’t about blindly accepting a friend’s or family members pitch, one should only invest when you have your own business plans until then don’t invest in anything. Without your own goals or standards, you lack a basis for assessing the opportunity which makes you vulnerable to sales pitch that sound good. It’s advisable not to invest money you need access to.

Read: How to Invest at the Nairobi Securities Exchange

Many investments in small businesses are completely illiquid even if the business survives and does well, your funds may be tied up until a major event frees up your money.

Kenya’s economy is strong and gets stronger and is expanding. Now, it is the right time for you to seize immense business opportunities your country, Kenya, is offering. Do not let foreign investors take advantages on you…there are a variety of investments which are safe to put assets in to: buying stocks, bonds, real estates, food processing and many other businesses both small and large scale.

Spreading your assets over a variety of different investments is perhaps the single most important rule you can follow, financial experts say. Diversification helps reduce risks by allocating investments among various financial instruments, industries and other categories. It aims to maximize returns by investing in different areas that would each react differently to the same event. Most investment professionals agree that, although it does not guarantee against loss, diversification is the most important component of reaching long-range financial goals while minimizing risks.

The reason you should diversify your portfolio, is that your investment performance should fluctuate less because losses from some investments are offset by gains in others. Therefore, you should have less risk than if you put all your money in one type of investment, such as stocks and bonds.

Diversification also makes sense because no single asset class performs best in all economic environments. So, chose your investments wisely and put them exactly where you want them to be.

Written by Amina Martha