Wonder how to start investing and where to invest in? In this article, I'll tell you how to diversify your portfolio to achieve high returns while maintaining the risk.
Many brokers allow you to begin investing for the cost of a single share or even a portion of it. Some firms also provide paper trading/test accounts, which allow you to practice buying and selling various assets such as stocks, cryptos, indexes, commodities, or ETFs using stock market simulators.
There is no one-size-fits-all solution for investing your money, so this guide will help you with defining your investment strategy. This guide will assist you in getting started with the appropriate tools and tactics.
For someone who is just getting started, investing might seem overwhelming, but to start investing, you simply need to download an app and start practicing.
There is no one-size-fits-all solution for investing your money, so this guide will help you with defining your investment strategy. This guide will assist you in getting started with the appropriate tools and tactics. For someone who is just getting started, investing might seem overwhelming, but to start investing, you simply need to download an app and start practicing. Here is a table I created to diversify my investments into several different categories.
LocationWhile this may sound obvious, at first we should separate all our offline investments, such as house, car, mobile phone, etc, from online ones, such as investments in stocks or crypto. Do we count the new GoPro as an offline investment or not? For simplicity, you can start with something big, like a house and a car, if you have one. Later, you may add to the list already mentioned, an iPhone or GoPro.
Someone may argue or suggest that you use only items that generate you money, so a house where you are living is not an investment, but if you have another one for rent, it is. I would suggest counting everything that costs more than some critical sum to you. For someone it can be $100, for another person it is $1000, but you have got the idea. Also, if you go to a local bank and put some money on a deposit to earn interest, it counts as an offline investment.
To round out the list of online investments, here are the company shares or stocks, ETFs, indexes, crypto, and anything else that you can buy or sell from your phone in a single day. If some of these words are not familiar to you, no worries. I will tell you about them later on.
MarketThere are 7 main markets available to you to invest in:
- Real Estate
RegionThe world is usually divided into 3 regions - America, Europe, and Asia, respectively. When buying shares on the New York exchange, these investments should be attributed to the Americas. Likewise, with buying an apartment in Spain for rental or buying Adidas stocks, it will go to the European Region.
CountrySeparation by region is a good starting point, but later diversify even more by controlling your investments in different countries in the same region, say the same percentage in Germany and France.
ExchangeIf we go even further, some countries have several exchanges, like NASDAQ and NYSE in the USA, so you might want to keep your money on each exchange to be on the safe side.
SectorWhen investing in stocks, you should buy stocks from different sectors for the same reason. In the event of a drawdown in one sector, others tend to go up.
IndustryEach sector is divided into several industries and, as a rule, diversification by industry is even more a confusing process that allows you to even less reduce the risks of drawdown of your portfolio.
Bank/Exchange/BrokerEven having split all investments into different regions, countries, and markets, it would be foolish to keep all the money in one bank. Therefore, it is advisable to divide them among several.
Commoditiesare real goods and can be divided into several sub-categories:
- Soft (commodities are goods that are grown):