Protecting Investments With A Diversification Strategy

Protecting Investments With A Diversification Strategy

As 2020 approaches, many investors are watching the stock market for the best investment options and to examine the performance of their existing investment portfolios. An experienced investor knows the importance of diversifying a portfolio for investment protection; whereas, a beginner may lack knowledge. Beginners must educate themselves on investment diversification and the risks involved with all investing products. No investment is safe, whether it is stocks, bonds, or commodities. They all have various risks impacted by global economic conditions.

Now is the time to keep up with the latest news on national and international economies and events. Many investors use the information to make strategic decisions on purchasing or selling stocks and bonds. For example, if investors have money invested in foreign governments and discover a particular country is in economic ruin, they are likely to remove their funds.

The hardest decision an investor has to make is selecting the best investment options to balance a portfolio. Experienced investors include a mixture of investments from different industries and sectors. The most common are manufacturing, oil and gas, healthcare, technology, and financial services. The healthcare industry is booming now in various sectors, especially biotechnology. Two of the best biotech stocks in 2019 are Gilead and Novo Nordisk.

Investing in Biotech Companies

Companies such as Gilead are a perfect stock to invest in if you prefer dividends. Dividend investments usually have a four percent dividend yield making it more competitive in the biotechnology sector of the healthcare industry. Most large biotech companies offer dividend payments. A smaller company may not offer dividends if it is in its startup stage. The stocks are less competitive and desirable among investors.

Some biotech companies have penny stock options with trading below $5 per share. Penny stocks are available and advantageous with opportunities for long-term growth. The market is competitive in most industries, including healthcare and medical.

An experienced investor may include biotechnology companies combined with other sectors in the healthcare industry. The best option for multiple stocks in the biotech sector is the Exchange Traded Fund (ETF). Investors can select a variety of securities combined in one investment. Some top ETFs are iShares Nasdaq Biotechnology, SPDR S&P Biotech, and ALPS Medical Breakthroughs.

The industry is rapidly growing with many types of active stocks. The key is to seek securities with a high return on investments. Before investing in any company, be sure to do your research and examine its financial statements, preferably the income and balance sheet. It gives investors an overall picture of the company’s financial position.

Industries to Consider for Investment Diversification

The top five industries for new investment opportunities in 2018 and 2019 are sectors in healthcare and technology, oil and gas, manufacturing, technology, and finance. Most of the industries have penny stock options. Biotechnology stock is an option to include in a portfolio and a favorite among traders. Do your research to determine if the FDA approves the company’s products first. The last thing an investor wants to do is place a bet on companies in violation of government approval in the healthcare industry.

Consider a diverse portfolio comprising of investments in multiple sectors for protecting your assets. For beginners, always research different industries for new investment opportunities. Combining biotechnology with other companies in oil & gas, technology, and metal commodities minimize losses on investment returns.

Diversification is Important

Diversifying an investment portfolio is significant in risk management. Avoid putting your money in one nest and allocate it to different asset classes. It allows an investor to manage risks in multiple companies and industries. A pooled investment of stocks and bond funds is optional for portfolio diversification.

Many investors know based on life experiences that diversification is the key to risk minimization and exposure to additional return opportunities. A diverse investment portfolio safeguards against the downturn of economies and markets. It reduces volatility in the stock market when prices change.

Investors must keep track of investments and performance to make needed adjustments to their portfolios. It requires continuous monitoring to make good decisions about trading, purchasing, and selling. In 2020, keep an eye on stocks in the biotechnology, technology, oil & gas, and pharmaceutical. Explore different national and international industries and sectors.