How to Diversify Your Investment Portfolio for Long-Term Resilience

Diversification is a fundamental principle of investing—don’t put all your eggs in one basket. By spreading your investments across different asset classes, regions and sectors, you reduce the impact of any single investment’s poor performance and build resilience in your portfolio.

### Types of diversification

1. **Asset class diversification.** Allocate funds across equities (stocks), fixed income (bonds), real estate, cash and alternative assets like commodities or unit trust funds. Each asset class responds differently to economic changes.

2. **Geographic diversification.** Investing in different regions—such as Malaysia, other Asian markets, Europe and the United States—helps smooth out regional economic cycles.

3. **Sector diversification.** Within your stock holdings, spread investments across industries such as technology, healthcare, consumer goods and financials.

### Steps to build a diversified portfolio

1. **Assess your risk tolerance and goals.** Consider your time horizon, investment objectives and ability to handle market ups and downs.

2. **Review your current holdings.** Identify areas where you are over-exposed to a single asset or sector.

3. **Allocate your assets.** Decide on a mix of asset classes that aligns with your risk profile (for example, a balanced investor might hold 60% equities, 30% fixed income and 10% cash or alternatives).

4. **Invest in broad-based funds.** Exchange-traded funds (ETFs) or unit trust funds that track broad market indices can provide instant diversification.

5. **Rebalance periodically.** Over time, some investments will grow faster than others. Rebalance annually or semiannually to maintain your target allocation.

Diversification won’t eliminate risk entirely, but it can reduce volatility and improve the likelihood of achieving your long-term goals. For guidance on designing a diversified portfolio tailored to your needs, contact All Weather Financial.