Whether you are in the real estate market or the investment market, you cannot forget the importance of diversifying your portfolio. You can never be too sure what the market will do at any moment so it pays not to put all your eggs in one basket. That said, here are some diversification tips you should keep in mind.

Spread the Wealth

Never put all your investments in one sector. Indeed, equity is quite lucrative but it doesnt mean that you should use all your money to buy one stock. Create your own mutual fund by investing in several companies you know.

Consider Index or Bond Funds

The market can prove to be quite volatile and uncertain. Therefore, you want to consider adding fixed-income funds or index funds to your mix of investments. Investing in securities that track indexes is a good long term diversification investment of your portfolio. Fixed-income solutions also act as a hedge against market fluctuations.

Keep Building

It is advisable to add to your investments regularly. Lump sum investing can be quite risky.  Instead, you can make use of dollar-cost averaging. This levels out the high rises and lows of the market. The trick is to regularly invest money into a specific portfolio of funds or stocks.

Know When to Get Out

Whether you choose to buy and hold or use dollar cost averaging, it is important to know what is happening around. Dont ignore the forces at work as you can easily lose your money if everything goes sideways. Stay updated and keep up with the most recent market developments. In fact, you should be current with your investment and be well informed of the overall market conditions. Knowing what is happening to the companies you have invested in places you in a better position when deciding whether to stay or leave.

Keep an Eye on Commissions

If you are not so much into trading, understand the returns you are getting for the fees you are being charged. Different firms have varying rates. Some charge monthly whereas others charge on a transaction basis. The main idea is to be aware of what you are paying and the returns you are getting for your payments. Remember, the cheapest choice is not always the best alternative.

Balance Risk and Return

In as much as diversification protects you from devastating losses, it will cost you when it comes to annual returns. Risk and reward go hand in hand. By reducing your risk, you also reduce your return. Therefore, take a little risk once in a while. The secret to making more earnings is to be as educated as you can and make more informed decisions.

Investing should be more fun than stressful. It can actually turn out to be informative, educational and also rewarding. By being disciplined, diversifying your portfolio and making use of useful strategies such as dollar cost averaging, investing can prove to be very rewarding even during tough times.