Tips for diversifying your business investment portfolio

As business owner, you know that you should never put all your eggs in one basket.From experience, you've probably learned that it's never a good idea to count on just one person, thing, event, etc. to come through for you.If you want things to work out well, you need to plan and make decisions that will allow your business to succeed.This is why you should have a diverse business investment portfolio.If you've ever invested in anything, you know how important it is to have diverse accounts.But in case you don't know, or maybe you just need a refresher, here are some tips for diversifying your business investment portfolio.

First, let's talk about why you should diversify your business investment portfolio.Anyone who has ever invested in the stock market knows that not every stock purchased goes up in value. Even with tremendous amounts of research and years upon years of experience, investment professionals are not always right. There are too many unknowns and too many changes always taking place to be 100 percent sure that any investment will work out the way you planned. That is one reason why diversifying your stock portfolio is wise.Spreading ownership over different stocks in diverse industries reduces the risk that the stocks you have chosen in a particular industry could be the wrong one.It also reduces the risk if you have invested in the wrong industry.

Now, how much diversification should you have?The best answer may depend on you and your business.You should have enough diversification so that you have a broad exposure to the whole market, so much so that you can not easily follow the stocks you own.Keeping a meticulous record of how your stocks do each day is not the best way to invest your money, especially if it's a relatively long term investment.You're much more likely to panic or just do something unwise with your money if you're tracking it every day.It's a much better idea to simply choose a place to invest your money and let it sit, only checking up on it every month or so.

Generally, you should try to have investments in at least three to four stocks in one industry or in four to five industries.For example, a portfolio of fifteen technology stocks is not diversified.However, a portfolio of one stock in fifteen different industries is probably also not a good way to diversify your stocks.Having a portfolio of more than twenty-five or thirty stocks in two or three industries is a good way to diversify.In this situation, however, you will probably not be able to stay up on what each stock is doing each day.But as mentioned above, that is probably an idea situation for anyone who is creating a mid- to long term investment.

Another way to diversify your investment portfolio is to make your investments over a period of time.That way you're assuring that you're not investing all your money at the top of a bull market cycle.True, you may miss some appreciation, but you'll be safer.Remember, no one, not even a great financial analyst, can predict short-term movements in the stock market.By spreading your investments over a few months, you will be able to eliminate the risk of making all your purchases when the stocks are at their highest points.This will prevent you from losing a large part of your money too quickly.It will also average out the price volatility of your investments.This approach will help the average price for your stocks reflect the average market values for a give period.

By diversifying your business investment portfolio, you will be able to reduce the risk of making bad investment choices.