Tip #3: Diversify geographically

Economic growth, market volatility, and interest rates are often influenced by political events or domestic instability. That’s why spreading your investments across both domestic and international markets can help you mitigate such risks. 

Fortunately, today’s global economy offers a wide range of investment opportunities beyond your country’s borders. However, before investing in a foreign market, it’s crucial to do thorough research. Key factors to investigate include the country’s political structure, level of civil unrest, corruption, currency stability, economic policies, and legal system. 

Exploring emerging markets can offer high growth potential, but it often comes with increased risks. Always evaluate all the risks carefully before making investment decisions. 

Jack applied this same thinking to his farm. Since his land occasionally floods during the rainy season, he started renting a plot on higher ground. Just like investing across borders, Jack’s move helped protect his harvest from the local risks he faced.

Tip #4: Use different investment strategies

Another way you can diversify is by balancing your portfolio with a mix of growth and value investing. 

Growth investing focuses on companies that are expected to grow faster than the market average, in terms of revenue, earnings, or market share. These stocks tend to be more volatile but offer high growth potential, reflecting investors’ expectations for future growth. 

Value investing, on the other hand, involves identifying stocks that appear undervalued in the market. This approach aligns with how investors selectively buy stocks that are undervalued in the hope that the market eventually recognises their true value and increases over time. 

Adopting both strategies can help build a balanced portfolio, since growth and value stocks often perform differently depending on market conditions. 

Over time, a seasoned Jack learns the importance of planting different crops. He realised that fast-growing vegetables, which mature quickly and require less effort, are similar to growth stocks, as they offer quicker returns but can be less predictable.