4 Ways You Can Diversify Your Investments Like Jack

Markets are unpredictable. They can be up one day and down the next. That’s why diversification matters. By spreading your money across different assets, you reduce risk by building a portfolio that can weather market volatility. A resilient portfolio isn’t just about anticipating major market events; it’s also about being prepared for the unexpected by ensuring you have multiple layers of backup. 

Putting all your money into a single asset is risky because if it tanks, so does your entire investment. As the saying goes, “Don’t put all your eggs in one basket”. If you do, and the basket drops, it’s likely that you’ll lose everything. But if you spread those eggs across a few baskets, a single fall won’t wipe you out. 

Take Jack the farmer as an example. He chose to plant just one type of crop because beans were easy to grow. However, one stormy night, heavy rain flooded his entire field and destroyed everything. With no variety and no backup, Jack was left with no harvest. On top of that, he lost all the money he had spent on seeds. 

Even the savviest investors can’t predict every downturn, but they can prepare for it. Whether you’re just starting out or a seasoned pro, building a well-diversified portfolio is one of the most reliable ways to help navigate market volatility and economic storms.  

Here are a few ways you can start to build a resilient portfolio that can weather market cycles:

Tip #1: Diversify within an asset class

One way to diversify is within a single asset class, like stocks. However, loading up on stocks from the same sector isn’t true diversification, even if you’re investing in different companies. That’s because companies within the same sector often follow similar trends. So, if one is hit by a downturn, the others may be too.