Have you developed a new or heightened interest in investing during the current crisis? Whether dueto low stock prices, seismic market fluctuations, or those in lockdown simply having more spare time, global Google searches around investing are at a five-year high. But whether you’re a fledgling trader taking your first stepsor a seasoned investorhuntingnewopportunities,the importance of a well-diversified portfolio cannot be overstated.

Having a ‘diverse portfolio’ simply refers to spreading your money across different markets - rather than investing it all in one stock or currency for example - in order to minimise risk.When done right, you’ll earn stable rewards while being more protected againstlosses in individual investments.

Different assets present different threats and opportunities, so it’s a smart move to assesstheir characteristicsand how they match up with your other investments and financial goals. Here are five ways to do just that and diversify your portfolio.

Balance time and correlation

Time and correlation are two vital elements of diversification.

Time refers to your financial goals, i.e. short term or long term, and the financial instruments best suited to them. Stocks are an ideal asset category for long term investment and steady returns for example, while forex trading with Tickmill could lead to higher profits in the short term.

Correlation refers to the degree to which your investments fluctuate in tandem. A diverse portfolio features investments in markets that don’t fluctuate in conjunction with one another.

Consider mutual or exchange traded funds

Investing portions of your money in mutual funds or exchange traded funds (ETFs) is another way to spread your bets. Mutual funds are pools of investments in various securities that are typically operated by a professional fund manager. This person will handle where the fund’s money is invested in line with a mutually agreed investment objective.

ETFs are similar in that they involve a collection of securities but are listed on exchanges throughout the day.

Diversify by company size and type

As well as diversifying between asset categories such as stocks, bonds, and commodities, it’s also worth diversifying within the categories themselves.

You can do this by investing in companies of different types and sizes, such as large companies in retail and smaller companies in tech. You could then also split funds between government and corporate bonds.

Invest in foreign markets

It’s natural to stick to markets close to home, especially when first starting out. But investing in international asset categoriescan help you tap into up-and-coming economies of a different risk profile to your home nation’s. 

Going global is simply another way to spread risk around. That way if markets stagnate domestically, you could still find rewards abroad.

Ultimately, investing will always involve an element of risk. But by deploying the strategies described above, you’ll stand a better chance of achieving your goals.