Diversification is a well-known risk management technique. It refers to the practice of mixing a wide variety of investments within a portfolio, instead of relying on a single type of investment. In plain terms, diversification means not putting all your eggs in one basket.
The advantage of diversification within your portfolio is that it will likely lead to more optimised returns and pose a lower risk than any individual investment within the portfolio.
Investors look to the alternative asset classes as a way to provide this diversification — for instance, investing in real estate as well as in the stock market. Commodities such as diamonds are part of an alternative asset class that has become considerably more attractive to investors in recent years.
Are you still unsure of how exactly to start diversifying? If you’re looking to lower the overall risk and increase the chance at yielding higher returns on your investment portfolio, we recommend the following investment mix:
- One third real estate
- One third fixed-interest securities
- One third movable assets or commodities, such as diamonds
Unlike other assets, diamonds offer protection against any credit risks from banks or financial institutions, currency fluctuations, and inflation. This means diamonds perfectly fit in an investment strategy that uses diversification, and thus are a crucial tool reducing unsystematic risk. Click on this link for more information on why (and how) to include diamonds in your investment strategy.