How to Build a Diversified Portfolio

Don’t put all of your eggs in one basket.

It sounds so cliche’ these days, but the importance of diversification cannot be overstated.

So what does it mean to diversify your investment portfolio? A diversified portfolio is one with investments in different assets classes – for example, shares, real estate, and bonds. It will also likely include an array of geographical locations and industries. This ensures that if one aspect of the market is not performing well, you will not lose all your money and maintain the potential to make money in other asset classes.

We consider the below elements when building a portfolio for our clients:

  • 1. Keep an eye on the prize

Buying and holding is a valid long-term strategy, but we still need to maintain an eye on the investments rather than remain on autopilot. Staying on top of any changes in the investments and overall market conditions means that there is the option of selling down the investments, and transferring the funds elsewhere if necessary.

  • 2. Spread the seeds

Investing in stocks can be quite lucrative, but it is important that our client’s money is not tied up in just one specific stock or sector. We invest in companies across many locations and industries to reduce the risks associated with investing.

  • 3. Consider your defences

Fixed-income investments are a diversification strategy that can help protect you against market uncertainty and volatility. These are generally long-term investments where our client’s wealth will be protected from most market events.

  • 4. Watch out for fees

The costs of holding the selected investments always needs to be a consideration when building a portfolio. There may be platform fees, investment fees, management fees and performance fees, but we strive to keep these as low as possible for our clients to ensure they’re receiving significant value from their investments.

  • 5. Continue building the portfolio

Adding to our client’s investments on a regular basis, using dollar-cost averaging, helps their portfolio be more resilient to changes in the market. Dollar-cost averaging is a strategy that allows you to buy a set dollar amount of an investment at regular intervals. This allows our clients to consistently grow their portfolio by buying more shares when prices are low, and fewer shares when prices are high.

How the Endorphin Team can help

Endorphin Wealth can give you a head start on your investment journey. Our team of advisers will help you determine your financial and lifestyle goals, then choose a portfolio based around your unique needs, so you can feel empowered knowing your investments are aligned to your goals.
For an obligation free discussion, call us on 03 9190 8964, or email us at advice@endorphinwealth.com.au

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