Investment Review day 47 of 50: How do I ensure my portfolio is diversified?
Diversification is the cornerstone of any sound investment strategy. It’s the simple yet powerful concept of spreading your investments across various assets to mitigate risk. Here’s how I diversify my portfolio for optimal results, and also to allow me to sleep easy at night!
I balance my portfolio with a mix of mature established companies, mid-cap growth companies, and small-cap high-risk high-return investments.
I consider potential risks using PESTEL analysis, seeking to identify the Political, Economic, Social, Technological, Environmental, and Legal factors that could impact my investments. I don’t want a single risk to pose a threat to a significant proportion of my investments.
I track my geographic exposure, but importantly I think about where the companies I’m invested in generate their revenues, not simply where they’re headquartered.
I track my %age allocation to each of the megatrends I’m invested in, ensuring I’m not over exposed to any particularly investment theme or sector. I’ll be walking through a few of those investment themes over the next two days!
How do you manage your own portfolio risk?
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I’m putting my holdings under the microscope. Over the next 50 days I’ll break down my whole investment portfolio. Wins, losses, and the ‘why’ behind it all. And on day 50 I’m going to share my full portfolio so you can see how my strategies played out in the real world over the last twenty years and what we can all learn together. Follow along for the journey! #StockAnalysis #50daychallenge
