The Significance Of Having A Diverse Investment Portfolio

Andrea Ward and Matt Ward

When it comes to investing, there are many different strategies that you can choose from. One of the most important things that you need to keep in mind is the importance of diversification. Diversification is the process of spreading your investment across different asset classes, industries, and even geographical regions. By doing this, you are effectively hedging your bets and reducing your risk exposure.

What Is Portfolio Diversification?

This refers to the process of investing in a variety of different asset classes, industries, and markets - in essence, it is the practice of spreading out your investments in order to reduce the risk of having your portfolio concentrated in one particular area. By diversifying, you can minimize the amount of risk you take when investing, while helping reduce the amount of volatility in your portfolio.

Time and Types of Investments

The most common way to diversify a portfolio is by time. This involves investing in a mix of short-term and long-term investments in order to balance out the risk associated with holding any one particular asset class or type of investment for too long.


It is important to note that different types of investments have different levels of risk. For example, stocks are typically considered to be more volatile than bonds. It is important to also consider the types of investments that you are making in addition to the time that you are investing. 

Why is Diversification Important?

Keeping your eggs in different baskets is an important part of any successful investment strategy for a number of reasons. 


  • It allows investors to spread the risk across different asset classes, reducing the overall risk exposure of the portfolio.

By investing in a variety of different asset classes, you can create greater diversification in terms of how the money will be used; for example, money invested in stocks can be used for either income or capital gains, depending on how it is invested.


  • Better returns in the long run.

By being able to invest in multiple asset classes and markets, the potential to build wealth is increased due to the added potential to benefit from different market cycles.


  • When an investor diversifies his or her portfolio, they can reduce the amount of time spent actively managing it, as well as reduce their exposure to risk. 

How to Diversify Your Investment Portfolio

One of the most important steps to diversifying your portfolio is to identify different asset classes that you are comfortable investing in. These can include stocks, bonds, commodities, and other asset classes. You can also choose to diversify across different industries, markets, and even geographical regions. When diversifying across different asset classes, it is important to consider the amount of risk associated with each one. For example, stocks are generally considered riskier than bonds, so it is important to select stocks that have a lower risk profile.


It is important to consider the amount of liquidity that each asset class has. Once you have identified the different asset classes that you want to invest in, you need to decide on a specific strategy for each one. This will involve setting a specific budget, target return, and asset allocation.


Remember that diversification doesn’t just apply to asset classes, but also to individual investments as well. This means that you will need to consider the types of investments that you are making in each asset class in order to get the most out of your portfolio.



By spreading out your investments, you can reduce the risk exposure of the portfolio and increase the potential for better returns over the long run.

Minimize the amount of time and effort that needs to be spent actively managing and rebalancing your portfolio. Call us on (817) 238-1360 or EMAIL us to book an appointment today. We would be happy to respond to any inquiries you may have.

Andrea Ward, CPA


Andrea has worked in the finance industry for nearly all of her professional life. Taking over the family business she continues to combine her tax and investment knowledge to leverage the investment power of money while reducing gains taxes paid to the IRS. She lives in the Fort Worth, Texas area, (although is happy to work with virtual clients all over the United States!) Andrea loves to travel and dabble in home decorating.

Matt Ward


Matt began helping clients in the insurance industry. However, he struggled with big business’s emphasis on selling rather than helping, so he came to work with the family business focusing on investment advisory. In his free time, he shreds the gnar on his snowboard and jams on drums and guitar (but not at the same time).

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