As an expert stock trader or a beginner, one thing, you are constantly weary of is risk. The popular phrase -the higher the risks, the bigger the reward, has started to loose relevance, as day after day we realize that smart risks often present the best rewards, as they shield you from losses and unforeseen events. One way to take smart risks is by diversifying your portfolio. Simply put, DO NOT PUT ALL YOUR EGGS IN ONE BASKET.
In this article, we have analysed 4 reasons you should always diversify:
YOU OWN THE ADVANTAGE IN DIFFERENT MARKETS.
Diversification allows you to explore different markets. For instance, rather than just investing in the Nigerian Stock Markets, you might explore some other markets like NASDAQ or New York Stock Market, known to be home to stocks like Exxon Mobil, Uber etc. With this in mind, you should only trade with an app like ARMSTOCKTRADE that gives you the best of all markets. Investing globally is great way to diversify your investments, because different areas of the world may be experiencing different growth than the domestic market, thus, creating principal shield, and higher returns potential for you.
YOU WORRY LESS ABOUT YOUR EXPOSURE TO RISK.
Still on, putting all your eggs in one basket, basically, if you’re investing all of your money in one sector, your risk level is far higher. What if something happens and that sector crashes? E.g. the effect of COVID-19 on the travel sector. It is important to diversify by investing in multiple sectors, and with ARM Stocktrade app, you can do this, and also, enjoy research analysis that can guide you on which stocks/sectors to invest in that help you mitigate risk. By diversifying, you can spread your wealth sources around, so that you’re never risking everything.
Weather market storms.
Sometimes, a market event can affect a particular industry, which can negatively affect your entire portfolio. For example, companies in the Tourism and Hospitality are the most by hit by the recent Covid 19 pandemic. Diversification allows you to invest in a variety of industries, company types, and even different sorts of assets. By having a variety of assets, you are better prepared to weather market storms.
Gain a better understanding of the market.
Moreover, diversifying your investment portfolio will make you a well-rounded investor and trader. It exposes you to different markets and different investment types, ensuring you’ll gain a more inherent understanding of the economy and WHAT MAKES MONEY MOVE.
By continuing to educate yourself in these ways, you’ll expand your knowledge base. Knowledge is power when it comes to investing. The more you know, the more investment ideas you’ll be able to generate.
One thing is certain: the market and the business landscape are both ever-changing. By diversifying, you’ll be better able to stay mentally on top of it, thus remaining more nimble as an investor.
Start investing in local and foreign stocks, download ARM Stocktrade app now