Portfolio analysis: Nike and Tiffany investments diversification assessment

Diverse Portfolio

How important is it for you to diversify your investment portfolio?

An investment portfolio is extremely important to diversify primarily because it shows a unique approach towards business. A diversified portfolio will ensure that the individual or company is not only smart in their investment but it will also show other companies that wide array of knowledge of the industry that the investor has. The importance of a diversified portfolio lies in the fact that it provides the investor a wise perspective on the market and allows him to handle the entire range of investments in a calculative and profitable manner. A diversified portfolio also portrays an image that the investor is skilled in assessing and reacting positively to the different market and investment sectors (Allen, 2008).

The biggest advantage of having a diverse portfolio is the fact that the risk factor decreases to a level that is manageable. Investing only in a handful of sectors with a large percentage of the money as opposed to numerous diverse sectors with evenly divided smaller sums of money ensures that the market will most likely play to benefit the investor. The investor will also have far less reliance and dependability on a few sectors. Another important aspect of the diverse portfolio is that it does promote a very aware and intelligent image of the investor; especially in case of a global investment portfolio where the investor can demonstrate, through the stocks he invests in, the knowledge that he has of the region, the market and the economy (Allen, 2008).

Of course, it is not the easiest thing to build a diverse portfolio, it takes time, effort and patience as well as shrewd knowledge of the market trends and investment choices that are available every minute in the diverse marketplace. Hence, for a new investor, it is a wise choice to align himself with an investment company who can help start an investment portfolio and build the network of money distribution according to the market stature. It is important for the investor to stay completely involved with the market trends in order to make sure that he does not incur much loss.

How would you diversify your investment portfolio?

Mutual funds investments are perhaps one of the most successful ways today to ensure that you have a diverse portfolio. The process of mutual fund is such that the mutual funds corporations take the entire investments bundle and distribute it across different sectors in the industry in an even and systematic manner. This way when one of the sectors falls, the balance remains and no serious loss is incurred as the worth of the investment in its entirety remains good (Gandhi, 2006).

Investing in sectors that are indirectly related like healthcare, IT and blue chips. These are all different sectors of the same industry, and, the likelihood of all of them falling in investments at the same time is extremely rare. In fact the higher probability is that if one sector falls, the investments in the other two rises, allowing your investment to remain stable (Gandhi, 2006).