Now that I’ve talked a little bit about multiple types of investing, I wanted to talk about a general strategy that I like to follow with my investment portfolio.

This strategy is called portfolio diversification, and it is essentially just a way of saying that you should be putting eggs in multiple baskets, instead of just one. In this example, the eggs represent your money, and the baskets represents different sectors in the market. Like real estate, stocks, bonds, cryptocurrency, index funds, etc. I believe that it is important to invest in all of these, not just one area. By spreading out your investments into different sectors you are protecting your money, if one area of the market starts to fall, then another sector doing good will cancel out bad. This way you can limit your losses. You are also increasing your exposure to different markets which allows you to see the rewards of each market.

For example, lets say that you have money invested in index funds, stocks, and real estate. Lets say that housing prices have been crashing and with that crash your real estate investments start to tank. Obviously that sucks, but in the investing world it’s nearly impossible to never take losses. However, since you have a diverse portfolio, you will still be gaining money with your index funds and stocks. If you had all your money invested into real estate, and it crashed, you would likely lose a lot of money and it would be very hard to recover. By diversifying your investments you allow yourself to lose money without tanking your entire portfolio.

Lastly, I’d like to share the portfolios of some of the worlds best investors, this information was found in one of my favorite books, Money, Master The Game.

Ray Dalio: 7.5% commodities, 30% stocks, 15% intermediate US bonds, 40% long term US bonds, and 7.5% gold.

David Swenson: 20% domestic stocks, 20% international stocks, 10% emerging stock markets, 20% REITs (real estate investment trusts), 15% long-term US treasuries, and 15% TIPS (treasury inflation-protected securities).

John Bogle: 65% US total stock index, and 35% intermediate-term US bond market index

My personal diversification strategy isn’t as planned out with exact percentages, however I am personally invested in index funds tracking the S&P 500, individual stocks, (preferable dividend stocks), real estate stocks (I don’t have enough money to buy properties, so instead I invest in real estate stocks), and crypto currency. There are more sectors I’d like to get into in the near future but with my limited income this is what I’ve done so far!

*None of this is investment advice, but rather me sharing my thoughts and what I’ve found through my journey of financial literacy. *