Diversification is the key to wealth creation

The one thing that we have to learn from our ancient people is “Diversification”. We may remember our grand parents save their money in various Pouches, shelves, kitchen utilities etc. This is nothing but “Diversification” of money in various ways.

There is a saying- “Don’t put all your eggs in one basket”. That means, if you save/invest all your entire corpus in a particular product, your end corpus will be at risk. Instead, if you diversify your investments, across all the products correlation helps to mitigate risk.

Though you are interested/ fond of particular sector, it is not advisable to invest all your entire corpus in that product. For example- If you are interested in real estate, don’t put all your entire corpus in real estate as it may fluctuate. Same applies for gold, shares too.

There must be correlation between the product categories. If one product falls, the other product category will have to increase. For example- If you invest in shares and fixed deposits, if the price of the shares go down, fixed deposits money wold take care of your needs.

This is nothing but “Asset Allocation”. But it depend on individuals risk taking capacity and the time period. One has to diversify/allocate his investments to different asset classes whether it might be gold, shares, real estate or bank fixed deposits, what ever the asset class may be, it should be inversely correlated.

Diversify your investments in different asset classes as much as possible, so that if one asset class fails to perform, the other asset class outperforms. This is to be done by following proper asset allocation.

If you are familiar with various asset classes performances in different situations, You can diversify your investments on your own. But if you are not familiar with the various asset categories, sit tight, consult a financial advisor and take help of him. Don’t forget to inform your risk taking ability, goals, time period etc to your financial advisor so that he can guide you in the right way.

Let us unitedly follow- Diversifying of your investments in various asset classes to ensure wealth creation to you and your family.

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