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You are here: Home / Finance / Investment Diversification: What Is It and Why It Matters to Investors
Investment Diversification: What Is It and Why It Matters to Investors

Investment Diversification: What Is It and Why It Matters to Investors

May 26, 2021 By Cade's Team Leave a Comment

Today, about 8 in 10 Americans are in debt. Many find themselves carrying debt into retirement as well.

If you’re looking to pursue financial abundance instead, then you’d do well to learn about investment diversification.

What is it and why does it matter? Read on to explore more about this method and how you can use it to increase your net worth today.

What Is Investment Diversification?

Another term for diversification is asset allocation. This is how much you invest into different asset classes.

Investment diversification is simply having your investment dollars spread across multiple assets. Doing this usually, although not always, reduces your investment risk.

Unsurprisingly, there are different investment strategies out there such as the Stanley Druckenmiller investment strategy.

Druckenmiller’s theory can summed up by this quote from Andrew Carnegie, which Druckenmiller cites on a regular basis: Put all your eggs in one basket and watch the basket very carefully.

Similarly, Warren Buffett has famously shared he is against diversification, saying “Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing.”

In the past, Buffett has allocated as much as 40% of his portfolio to a single stock. However, with an astonishing net worth of $105 billion today, he has been forced to diversify to a greater degree than in the past.

Despite these overarching beliefs, both Druckenmiller and Buffet diversify when multiple opportunities present themselves with the potential for a big payoff. Also, other skilled investors frequently diversify to a greater degree than these greats.

Common methods they use include to diversify beyond asset class, within asset classes, or by the asset class.

Why Diversify?

In theory, spreading your investments across a few different investments can decrease your risk. Ideally, you’ll have control over a few assets whose performance is not related to each other.

Potential investment types can include bonds, stocks, commodities, real estate, cash, cryptocurrencies, gold, or silver,  for example.

You can choose different areas around the world to invest as well.

While proper planning is necessary, there’s no guarantee of what the future will bring. That’s why diversification can offer protection for your assets.

You can also perform an investment diversification strategy by age as well. Usually this means shifting your asset allocation from higher risk investments to lower risk investments as you age.

Identify Your Risk

Generally, cash alternatives are the safest option but their returns are the lowest. In contrast, stocks have higher risk but offer higher returns. Bonds are in the middle where you get moderate risk and moderate gains.

Of course, you can also invest in a diverse range of other asset types with varying risk and reward profiles.

And finally, while you want to diversify, avoid over-diversification. Over-diversification makes it difficult to manage your portfolio and it isn’t necessary for optimal returns. It can also cause you to incur unnecessary transactional fees.

The Role of Investment Diversification

Now that you’ve read this guide on investment diversification, seek out an advisor or a mentor who can help you come up with the right portfolio for your needs.

Would you like to read more informative guides and how-tos? Join nearly two million other readers who are learning how to increase income, invest for cash flow, skyrocket confidence, and so much more.

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Filed Under: Finance

About Cade's Team

Cade Hildreth is an LGBTQ+ entrepreneur, real estate investor, and former USA Rugby Player. Cade has founded 7-figure businesses, scaled websites to millions of views, acquired a portfolio of income-producing residential and commercial real estate assets, and played rugby worldwide.

As a world-class athlete, Cade has represented the USA Rugby Team, trained extensively at the Olympic Training Center, and played with elite squads from across New Zealand and Australia.

Often compared to Tim Ferriss and Ramit Sethi, Cade teaches millions to expand financially, while living an authentic and adventurous life.

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“As an LGBTQ+ entrepreneur, real estate investor, former USA Rugby Player, and fitness fanatic, I’ll teach you what your parents and teachers should’ve taught you, but didn’t know themselves.” -Cade Hildreth

Want to know what I learned making my first few million? Subscribe here.

Or, listen to Cade’s articles on the go as a Podcast.

Because it’s the New Year, let’s talk about ch Because it’s the New Year, let’s talk about change...

For a long time, I’ve thought about top surgery. I remember when I was 6 or 7 years old when I wanted to run around outside on a hot, sunny day with my shirt off…and I first saw my parents… hesitate. Ughh. 

It wasn’t their fault but I still remember that heart wrenching feeling. To their credit, they ultimately said, “Ok, go do it!” While I did “do it”, I remember the feeling of shame that crept in.

Over the years, being in affirming sporting/rugby circles helped suppress the urge to get top surgery, but it never quite “stayed down.”

So last summer I got keyhole #topsurgery. I’ll talk about recovery in another post because it was definitely weird to not strength train for months.

But in THIS post, I want to share two things:

1. I am SO grateful to my wife Erin for being the supportive and growth oriented partner that she is. 🥰🙏❤️ 

She is now following her call to get a divinity degree and she’s already working in ministry as a Pastor in Training at an incredible, inclusive Presbyterian church here in Virginia. I am grateful to her for supporting me as I become more and more of who I am—and I’m enjoying watching her do the same! Love you, babe!

2. Second, I’m grateful to get to share who I am with my family. This summer we took a trip to Madden’s resort in MN to celebrate my parent’s 50th wedding anniversary. (It was actually their 52nd, because we had to postpone it twice due to Covid.)

I was nervous to be in the pools and lakes around them, but I could feel it was my only choice because I knew I wanted them to “know me”. And, how could that happen if I “hid me”?

Ultimately, I have to tell you…it was freeing to be me, as I am, who I am. 

I had the BEST time splashing around and biking and goofing around with my wife, niece, nephew, & sister. 🌊🏖🐟

So, I suppose, this is a gratitude post to thank those who have supported me over the years as I become more and more of who I am. 

Top of that list is my wife, Erin, but there are countless others. ❤️

If you’re reading this, thank YOU for being one of those people in my life too. I am deeply grateful. 🥹
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#lgbtqfamily #nonbinary
How to set a boundary? 🤔 . . . . #lgbtqia #lgb How to set a boundary? 🤔 
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#lgbtqia #lgbtqcommunity #emotionalhealth
What do you do if you’re telling a past story ab What do you do if you’re telling a past story about someone who has transitioned? 🤔 Share a 💯 if you agree ➡️🏳️‍⚧️🏳️‍🌈
7 things I got clarity on in 2022: 1. Good and b 7 things I got clarity on in 2022: 

1. Good and bad are labels. All things are experiences. 

2. Maturity is taking full responsibility for oneself. 

3. Having a loving, conscious relationship with myself is a core value. 

4. Emotions do not mean that anything has to be done. 

5. When I am in congruence with what I want, I have it. 

6. I have permission from myself to stop doing anything that doesn’t lead to my peace and empowerment. 

7. Stepping toward emotions and being able to feel them is a superpower. It determines the quality of my life. 

(Are there any above that you’d like me to further explain?)
 
Most importantly, which # above resonates with you? ⬆️

Happy New Year, y’all! 🎊🥳
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#lgbtqcommunity #lgbtqiaplus #lgbtsupport #nonbinary #trans #selfgrowth
Interview with Jenny Nguyen, Founder of the Sports Interview with Jenny Nguyen, Founder of the Sports Bra—The World's 1st Bar to Only Play Women's Sports - shorturl.at/doGHZ

I'm excited to introduce you to today's #podcast guest, Jenny Nguyen, who is a professional chef, elite athlete, and entrepreneur.

I invited Jenny onto the podcast because she has done something extraordinary that is long overdue: She has opened up a sports bar that exclusively plays women's sports!

Despite extensive research, Jenny hasn't found another sports bar worldwide that ONLY plays women’s sports.

Given that it's nearly 2023, this is mind-blowing. As a lifelong athlete, I find her vision compelling and inspiring.

Aptly called the "The Sports Bra", the venue is putting Jenny's culinary skills on display alongside women's sports worldwide.

The Sports Bar has taken its mission a even further by partnering with and elevating other local, women-owned businesses.

Specifically, it:

1. Sources its grass-fed beef from @CarmanRanch, an ranch run by Cory Carman, a third gen rancher out of Wallowa, Oregon).

2. Sources its alcohol from Freeland Spirits, an all-women owned and operated distillery out of NW Portland.

3. Has furniture built by @girlsbuild_org, a non-profit organization headed by @ktmhughes in Portland, OR, that teaches carpentry and construction skills to young girls as a path to empowerment.

Since opening the Sports Bra this April, people have come from ALL over the U.S. and the world to experience it—including many professional female athletes.

To learn more about Jenny as she makes history, features women's sports, and elevates women-run businesses, listen to the episode here:

shorturl.at/doGHZ

Or, you can check out the Sports Bra at:

@thesportsbrapdx
TheSportsBraPDX.com/

Have you heard of the Sports Bra or been out to experience it in person?

#lgbtqiaplus #womenownedbusiness #lgbgtqia #lgbtqcommunity #womenssports #womeninsport
Over this recent holiday stretch, we… - enjoye Over this recent holiday stretch, we… 

- enjoyed some quiet time at home
- got a sauna delivered (but not yet installed)
- decorated for the holidays
- baked a bunch
- visited our favorite farm
- did some sight seeing
- and perhaps, most importantly, survived the cold snap along with our feather friends (who lived in the garage for a few days so we could heat them with a space heater) 🥶🐔

How have the holidays treated you…and did you get hit by the winter storms? ❤️🎁☃️❄️
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