Diversification and portfolio management

Risk diversification is a risk management strategy that consists of acquiring assets (investments) from different sectors and with different rates of return to reduce the risk of loss.

Diversification

The main objective in a diversified portfolio is to acquire assets of different types, returns, terms and risks, for example, you could invest in the stock market but the risk of loss is higher if you only invest in a single company unlike if you do it with 5 technology stocks and you would find diversifying but ideally have different stocks from different sectors, this will help you not to lose when it goes bad to a sector.

Portfolio management

There are many ways to manage a portfolio, but the best way is to diversify, there are also portfolios that have more risk than others, in theory a portfolio with more risk should aspire to higher returns but also has greater chances of loss, the recommendation is that the longer your investment term is the more you can bear the risk, This is because if there is a fall you have more possibilities of recovering what you lost the more time passes, the portfolios vary in percentages, you can have a conservative portfolio with 50% in government bonds, 30% in real estate and 20% in stocks or you can have a high risk portfolio, it can be the case that one has better returns but that does not mean that one is better than the other, it was simply better in a period of time.

Ideal Portfolio

The ideal portfolio for each person is different, it depends on several parameters but mainly three, the term in which you want to have the money, what you need the money invested for and the risk you are willing to assume, it is not the same to want to have the capital to buy a house in 5 years than to think about retirement at 60 years old, each situation is different. If you are starting in the world of investments I would recommend you to start investing in things that you like, maybe if you are interested in investing in the stock market you can start with shares of companies that you consume their products and also recommend them, but without forgetting that you have to make a previous analysis.