If you plan on living a comfortable lifestyle during your retirement years, figuring out a way to save for retirement is essential. Many Americans struggle to find a way to save money for retirement and many of those have trouble making sure that their portfolio is balanced. Without some balance in your portfolio, there’s a good chance that you will not be able to get the returns that you need to retire comfortably.
When saving for retirement, it is important to make sure that your portfolio is diversified to some degree. Diversification is a concept that deals with putting money into different types of asset classes and different investments so that your portfolio can weather the financial storms that may come along. If you put all of your assets into one particular stock and the company behind that stock goes out of business, you lose your investment capital.
If instead, you bought a few shares of the stock and then spread the rest of your portfolio out over several different types of investments, it would not destroy your portfolio when that company went out of business. By diversifying, you spread the risk of investing out a bit so that you have a better chance of success.
While it makes sense to diversify your portfolio within the same type of investment, it is also wise to invest in different asset classes as well. For example, instead of putting all of your money into the stock market, you may want to put a portion of your money into stocks and another portion into bonds. You could put your money into many different asset classes such as currencies, commodities, and precious metals.
When you invest in funds, you get a certain level of diversification built right into the investment. Mutual funds, exchange-traded funds and hedge funds all use diversification strategies to protect their investors. They pool assets together and then use those assets to invest in different securities. By investing in these funds, you can more easily diversify your portfolio without a lot of knowledge of investing.
If you are unsure of how to diversify your portfolio and make sure that it is balance, you may want to get help from a professional. Cavalry Portfolio Services are professionals in the investment industry and can provide you with the assistance you need to ensure that your retirement funds are invested correctly.
Tagged as: Investing
Last Edited: 18th May 2012