Diversification means spreading your investments across different asset classes, industries, and companies. The goal is to reduce the overall risk of your portfolio. Think of it as the investing version of the saying ‘Do not put all your eggs in one basket’.
For me, diversification of investments is both important and necessary. Owning four different types of investments helps with the overall portfolio diversification.
My portfolio diversification approach
For portfolio diversification in order to manage risk, our investments are diversified as they belong to different asset classes, are independent from each other, based in different locations, hold in different currencies (RMB, USD and PLN), managed by different financial institutions and going through different market cycles.
Over the last few years, I have been building the money-making machine in four different asset classes held in three different currencies including the Chinese RMB, the Polish PLN and the American USD:
1. REAL ESTATE generates RENT (in RMB)
2. BANK DEPOSITS generate INTEREST (in RMB)
3. ONLINE BUSINESS generates PROFIT (in PLN)
4. STOCKS generate DIVIDENDS (in USD)
I am looking forward to steady gradual increases in passive income month after month to grow the snowball.
Remember that diversification does not guarantee profits or eliminate all risks. However, it is a powerful tool for managing risk and potentially improving your portfolio’s long-term performance.
