Investment Portfolio Diversification  

A diversified portfolio has several benefits compared to a standard one. There are two kinds of investors. One is the long term investor and the other is the short term investor. In either case, they both have portfolios and may deal with it in a different manner.

A short term investor would be making constant changes to the portfolio to get a steady income or add steady profits. So, they may constantly add and remove shares from their portfolio. However, a long term investor seldom changes the portfolio and will stick to it even if it is making losses. They will be weighing all the possibilities relating to the sectors the investments are in. for example, if the oil industry is not doing well today, chances are it can improve tremendously in the next few years. The long term investors study all the market trends.

A diversified portfolio can be done for short term or long term investments. For example, a person may intend to invest shares in different sectors like oil, consumer products, automobile, software, construction, infrastructure and varied industries such as these. If the market crashes, it may not have effect on all these sectors. In fact, one industry may do quite badly, while others may not be affected at all. How the portfolio performs during this period depends on the percentage or ratio of shares invested in the non performing sectors. If repeatedly you are facing losses in one particular sector, then you may want to consider removing it from your portfolio.

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Investment Portfolio Diversification




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