Diversifying Your Investment Portfolio: Best Tips for 2022

By: Sophia Young


It’s no secret that the past two years have been difficult for investors. With the pandemic raging across the globe, many traditional markets have suffered, and many people with plans to build wealth have been forced to re-evaluate their investment strategies on the fly.
Spreading your investment portfolio across different asset classes can minimize your risk and build wealth over the long term. So, what are the best ways to diversify your investment portfolio in 2022?


Why diversify?

We all know the adage of never putting all your eggs into one basket. And when it comes to investing, diversification is key to building a strong investment portfolio that can weather any storm.
There are two main reasons to diversify:
To minimize risk – By spreading your investments across different asset classes, you can minimize your overall risk, since events that impact one class might not impact another. For example, while stocks might be struggling, bonds might be doing well. By investing in both, you can smooth out the ups and downs of the market and minimize your risk.
To maximize returns – While diversification won’t guarantee that you’ll make money, it will give you a better chance to earn higher returns over the long term. This is because you’ll be able to take advantage of different market conditions and invest in areas that are doing well.
As with nearly all strategies, the best approach can vary from case to case. Think about these things first before deciding how to best diversify your investment portfolio:
Start with your goals – The first step is to have a clear idea of your investment goals. Are you looking to grow your wealth? Save for retirement? Or both? Once you know your goals, you can start to think about the best way to achieve them.
Consider your time horizon – Your time horizon is the amount of time you have to invest. This will play a big role in how you diversify your portfolio. Those with longer time horizons can afford to take more risks, as they have time to recover from any short-term losses.
Think about your risk tolerance – Risk tolerance is the amount of risk you’re willing to take on. This is a personal decision that only you can make, based on various factors, such as your long-term plans, financial health, or temperament.
Once you have a clear idea of your goals, time horizon, and risk tolerance, you can start to think about the best way to diversify your portfolio.


Tips on diversifying your portfolio

Diversifying your investment portfolio requires you to pick an asset allocation model that dovetails with your personal goals, time horizon, and risk tolerance. Choosing one doesn’t commit you to that strategy in perpetuity. You can take parts from all four models and use them to create a hybrid strategy that’s tailored just for you.


Looking for a steady income?

First, you’ll want to consider a mix of assets that offer both stability and growth potential. While you don’t want to risk too much, you also don’t want to miss out on small opportunities to capitalize on market growth.
Second, it’s important to remember that even the best asset allocation model will involve some degree of risk. If you’re on a tight budget, we suggest using a financial plan as well as expense management tool to help you keep track of your spending.
Prime examples of assets for this type of portfolio include:
Municipal or corporate bonds
US Treasury securities
Well-performing, dividend-paying stocks.


Need some income but also want to grow your wealth?

For your needs, a similar model as above can be followed with some adjustments. The biggest difference is that you’ll want to put a greater emphasis on growth-oriented investments.
Your income will generally come from dividends from equity investments in stocks, as well as from interest payments on bonds. You may also reinvest dividends to purchase additional shares, which can result in compound growth over time.
Growth investments typically come with more risk than income investments, but they also offer the potential for higher returns.


Want to expand your wealth?

Just like the model above, an asset allocation model geared toward wealth growth will favor investments that have the potential to generate high returns.
It’s still possible to hold a few dividend income stocks in this model, but the vast majority of assets should be on companies with massive potential upside—these companies typically have no plans of paying out regular dividends to shareholders.

Want to expand your wealth as fast as possible?

An all-out approach to building wealth requires counting on high-return/high-risk equities and forgoing any income today in favor of huge growth opportunities in the future.
This portfolio would likely be made up mostly of small-cap stocks, penny stocks, and other high-growth/high-risk investments. The idea is to find a few companies that have the potential to explode in value and ride them to the top. Of course, this approach comes with a high degree of risk—you could easily lose everything you invest.

Here are a few examples of high-risk/high-reward investments:
Upstart companies – Companies who burst into the scene with a new product or service
High-growth small-cap stocks – Small companies with high potential for rapid growth
Options and futures contracts – Derivative instruments that can be used to speculate on the movement of underlying assets.

Diversifying your investment portfolio is one of the smartest things you can do to protect and grow your wealth. By allocating your assets among different asset classes, you can minimize your overall risk while still allowing yourself to achieve strong returns. Whether you want to grow your wealth slowly and steadily or go for broke with high-risk/high-reward investments, there’s a way to diversify your portfolio that’s right for you!

Networking: Building your business connections

Three business people talking to each other

By: Landon Mitchell

What is networking?

Networking is the exchange of information and ideas among people with a common profession or interest, usually in an informal social setting, and it is essential in business. Learning to find, engage, and close investors are tools every entrepreneur needs. These skills are useful for more than just finding investors. They’re a primary driver of getting sales, referrals, and other means of packing your pipeline with good leads! They are also used to find job applicants and in market research to get you in front of difficult-to-reach people that could help you learn and understand a specific field, as well as important policy and decision-makers.

When you start networking, you (obviously) have to make connections to get to where you want to be. So you go to networking events, call personal assistants, get on people’s calendars, meet them, and become friends to build that network and relationship. Though, the problem is that these people don’t have time or, honestly, a reason to care about you. The assistants in charge of their calendars act as gatekeepers. These people don’t need friends. So, instead of trying to navigate straightway to your end goal, you start with people you already know and trust to build your network. You have those people you know introduce you to people they know that might be closer to your end goal, and so forth. Pretty quickly, you’ll reach your goal.

How should I network?

The best place to start is with the people closest to you! And it’s your job to make it as easy as possible for them to help you. I want you to try a mental exercise in your head. Make a list of each of these different things:

  1. What’s a good restaurant in your state?
  2. What’s a good restaurant around you?
  3. What’s a good Mexican restaurant where you live?
  4. What’s a fast-casual restaurant appropriate for business lunches within a five-minute drive of your place of work?

With every question, your choices were more and more constrained, and because of this, they likely generated more and more options in your mind. The same applies when making business connections. When you say, “I’m looking to talk to anybody,” chances are you’re not going to because people don’t know everyone; they know someone. And until you can help people recognize the someone you’re trying to get to, it becomes difficult for them to know who to refer you to. The more specific you make your goal, the better. For example, let’s say you’re looking for someone who does billing in a pediatric office for a hospital system. While not very many people would know someone that does billing in a pediatric office, they might be able to put you in contact with a doctor, which is still a significant step towards your goal.

Meeting people

When you’re just meeting someone off a referral, you want to go from knowing nothing about each other to getting time from them. Here’s an outline you can use when meeting someone for the first time:

  1. You don’t know me, but our mutual associate [name] recommended you highly.
  2. I am trying to [specific goal], and [name] said you are the best person they know for this.
  3. Is there a time I can sit down with you for fifteen minutes to discuss this? (preferably in person)

Remember this: you never want to throw a sales pitch or anything like it. You want to try to build a relationship with them. You want to make sure they know you’re genuinely interested in them and that you aren’t just using them as a tool to get to where you want to be. People don’t care how much you know until they know how much you care. The more effort you put into a relationship with a person, the likelihood they help you increases. If you ever wonder if you’re being overbearing, just ask them! You want to show them that you’re respectful of their time.

And here’s an outline for that 15-minute meeting:

  1. I appreciate this so much. You came so highly recommended by [name]. How do you know them? 
  2. [Review ultimate goal] What experience have you had with this?
  3. Who would you want to talk to if you were in my position? [get three people, ask for an introduction]
  4. Do you think anyone would be interested in [ultimate goal]? How would you recommend I proceed? [solicit follow-up]

Once again, the more effort you put into the relationship you’re trying to create, the more likely they are to help. It’s always a good idea to ask for advice when in contact with someone that is in a position to help you! Remember this: If you ask for money, you’re more likely to get advice, and if you ask for advice, you’re more likely to get money. 

And there you have it! Connections are valuable and imperative to business, and this process helps shorten the path you take towards creating them. To learn more about networking, you can watch the full workshop.