How to Spread Investments with a Plan

It may not be possible to pick the star players, but you can buy the whole team. Spreading your investments allows you plenty of options and diversification is completely within your control. 

Why Diversification is the Smart Plan. 

Finding successful one-person businesses is like finding a unicorn. The fact is that good businesses are made from a solid team and the best teams incorporate people with a wide selection of skills, specialties and masteries of approach.

If you were putting together a sports team, would you select players who all had the same specialty? It may sound great to have a team full of goal-scorers, but it is equally important to have strong defense and strong supporting roles. 

There is no role that is any more important than the others. When everyone is doing what they do best and working together to do what they do best, you have a better chance of winning the game and the entire season. 

Much in the same way, building your investment team requires a well-planned diversified portfolio.

Investments can rise and fall quite suddenly, so you may see less than you originally invested. But remember that this article is not personal advice, if you do find yourself stuck, make sure to seek personal advice. 

What is diversification?

Diversification means spreading out your money over a variety of investment opportunities. 

This could include companies or any of the various types of assets like funds, bonds or even investment properties. This could be done in different parts of the globe or close to home and there are so many ways to accomplish this. 

This is why a football team makes such a good metaphor for investing. 

The first thing we learn when picking up a team sport is not to chase the ball but to stick to your position. 

If you have 22 players all chasing the ball around the field, it is quite likely that you are leaving large areas of the pitch wide open. If this is the type of plan you have for your investment strategy, you are leaving big holes in your plan and this represents significant danger. You have to keep your bases covered. 

You have to consider how you will play the game. Will your plan fall apart if some of your players don’t show up? Are you relying too heavily on your star-player? Remember that nothing good lasts forever. 

If there are many investors chasing a single investment, there is a good chance that the price is going to shoot up much higher than it is actually worth. But is this a short-term trend? And is buying into this plan going to align well with the rest of your plans?

Not everyone will have the same investment goals as you do. With this in mind, you must decide on the goals you have and stick to your plan. Review your plan constantly so you can be sure you are sticking to the plan. 

Prepare well when you can’t predict

Actually, investing is not about picking the winners. The truth is much less dramatic than that. 

Why should you be taking shots in the dark hoping you will strike gold, when you can buy the whole mine? 

If we had control over the way our investments would perform, the entire investment game would be very different. This is not really possible, but it is possible to spread out money evenly and be ready for any eventuality.  

The whole purpose is to make such predictability a non-issue. 

Then when you see your investments go up or down, if you have spread them out intelligently, you will not need to play guessing games and make rash decisions when your plan hits an unexpected event.  Read more about investing at The Bankers Investment Trust PLC – BNKR.

How to diversify

Types of investment, or asset classes – There are cash, properties and bonds, all are different and carry their own individual risks. As your goals change you will probably want to change the amount you invest in each class. 

Geography – why invest in a single country when you can be spreading your investments far and wide. Just like asset classes, there are many different locations where you can place your investments and all have different results. 

Final tips — it may feel uncomfortable to place your investments in an option that is not doing well. But when things turn around, you may find yourself in a great spot to make a killing.