Diversified Investment: Exploring modern opportunities for the modern investor
When it comes to financial investment, it is crucial to apply different strategies to make the most of your efforts and utilize your funds well. Try asking around from various investing experts and this is what you’ll get: explore diversified investment. But what does diversified investment mean and how should you do it? Keep on reading to learn more.
What Is A Diversified Investment?
In a straightforward approach, you can define diversified investment as the act of having a variety of investments that will individually have a separate reaction to economic events and market behaviors. This strategy is done to diversify your portfolio to be prepared in case something major happens in a volatile market. If you look at it with simple logic, diversifying your portfolio is just like the approach of not putting all of your eggs in one basket. This principle will help you avoid major losses in your financials.
Why is portfolio diversity recommended by the experts? According to most investors, fund managers, and financial planners, this type of approach will yield higher returns as it blends various types of investments within one portfolio. As investment is partnered with risks, diversification allows the investor a little room to breathe as their fund is spread out against different terms, venues, and markets.
As an example, we can look at bonds and stocks. In a growing or developing economy, you will notice that stocks perform better in comparison to bonds. However, whenever the economy is slower or at a decline, bonds are at a higher state than stocks. So, if you try investing on both, your investment portfolio will not face the risk of a total loss, whatever the ever-changing economy will dictate.
Diversifying Investment for P2P Platforms
In a Peer-to-Peer Lending platform, it is also important to build a well-diverse portfolio as it would help you protect your cash flow against high impact drops and fluctuations. The first thing to consider is the platform that you will use. It is better to transact with a platform that serves as the middleman for the transactions between lender and borrower, and eliminating a loan originator in the process.
You can also look at the different types of loan that the platform offers. Depending on the platform, you might see them offering car loans, salary loans, personal loans, franchise loans, seafarer loans, and fast loans. Each of these loan types come with their own different set of risks. Plus, each of these loans will be utilized in different industries and sectors, making the investments much more diverse.
At the end of each term, your success will be determined by how the borrower will repay the loan – it can be interest only, bullet, serial, and annuity.
4 Successful Tips For Investors Who Want To Diversify Their Portfolio In A P2P Set Up
- Spread Out Your Funds
The first tip is to start with diversification’s initial principle. Start by sticking to not putting all of your money in a single stock or investment type. In a P2P set up, this means spreading your money into different loans – a good number for a portfolio can be around 20 to 30 different loans. But then again, that depends on your experience and the time that you can commit into monitoring your investments. Make sure that you will not go too far and you will only divide your capital into a number that you can manage.
- Use Auto Invest As A Diversifying Strategy
A great way to apply the theories of diversification is auto investing. This is a feature that you can find in lending platforms that allows the investor to automate and customize their investment. The lender deposits their funds to the P2P lending platforms, set their parameters, and wait until the end of their term to reap their profit. Compared to other types of investment, auto invest allows the lender lesser risk as they are provided with 100% profit on the interest terms declared by the lending platform.
This investment strategy can help lenders who are eager to try out investing but get intimidated with the risks, terms, and techniques. Auto Invest allows you to relax a little as your emotions will not affect your investment. You just sit back, relax, wait for the end of the term, and enjoy your income.
- Review the currency & geography on your investments.
Because the P2P lending market is growing exponentially all over the world, more currencies are getting added into the mix. However, one thing to note is that currencies can fluctuate differently as they are dependent on each country’s economy. So, you can also check out trying to diversify your portfolio by investing through different currencies. Also connected with this is investing in different countries or continents, as dictated by your mood. Again, each of these territories has a different economic state, which also equal to varying results on your investments.
- Review the repayment schemes.
When diversifying your portfolio, it is also vital to know how you will receive your payments once your borrower has completely paid the loan. Depending on the P2P platform, you can receive a specific amount per month, the total sum at the end of the term, or in an increasing amount as the loan’s duration nears its end. Why should this matter to you? The repayment method will have a direct effect on your liquidity, cash flow, and investment flexibility.
Diversify your money with Blend PH.
Blend PH is committed in being your investment partner and helping you build a strong and bountiful diversified portfolio. Blend PH offers numerous options that will spread out your income and minimize investing risks. Our best recommendation? Try out our Auto Invest program and earn 9% interest on your investment. Let’s talk about it – shoot us a message at [email protected].