What are the Benefits of Diversification in an Investment Portfolio

To know the benefits of diversification in an investment portfolio because you have collected the money for investment from your small savings and by tight your expenses. But if you will invest your money only in one project  and if same project will fail, you have to loss your whole investment. You will be disappointed and give up your dream to get success. So, for taking better investment decisions, you must diversification.

1. Benefit of Diversify Your Secured Investments 

Govt. fixed deposit is most secured investment. But, still, you must not invest whole money in Single Govt. bank.  If you need the money on the maturity with its interest return and your bank branch will say to you. Dear, our whole computer data has deleted. We are trying to get backup. As backup will complete, we break your FD. You have no money in pocket for going to court and fight with same bank.

My personal Example :  I have invested Rs. 1 Lakh in FD in public sector bank name corporation bank. Its maturity was on 10th sept. 2017. I need money on same date. It did not give my money because its all software are updating. Now, today is 14th Sept. 2017, still my invested money and interest has blocked in same bank.

But thanks God who has given me brain. So, I did not invest whole secured investment in single bank. It will surely reduce your risk also.

2. Benefit of Diversify of Your Investment in Properties 

You must not invest whole money in single property. Same area, you may face loss due to decreasing the price of property. You may face lose due to fake documents will show because disputed property will not sell fastly. Diversification of investment in properties means to buy different properties from different seller and in different areas. If you will lose money in one area property, you will get good return from other area of property. Never invest whole money in the property which give you possession but not legal registry because it will become costly in future because you need to pay the money for getting the legal title of ownership of same property.

3. Benefit Diversify of Your Investment in Human Resource 

Never invest all your money on one employee for long time. He or she may be lazy and you will not get the return. Invest money in different people. If one person will lazy, you will say get out and safe your investment. With this diversification, you will get knowledge who is honest, dedicated and hard working employee and then, you can appoint him or her as permanent employee. Same employee will sure give good return.

4. Benefit Diversify of Your Investment in Different Types of Business

In today business environment, different types of business are affected from different factors. So, there is some risk in every type of business. But, you can decrease the level of risk and safe your capital by investing money in different business. Never invest whole money in online business. Never invest whole money in offline business. Make optimum balance both online and offline investment. With this, you can get better return. Few yours ago, I faced big loss in online business, but thanks my offline business which has give me good return and passive return. Now, offline business is not working good but online is great. So, diversification helps me to grow with fast rate.

5. Less Invest Money in the Asset which has huge depreciation

It is must because it will reduce your capital fastly and its maintenance cost will be high.


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Accounting Education: What are the Benefits of Diversification in an Investment Portfolio
What are the Benefits of Diversification in an Investment Portfolio
Accounting Education
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