Each week across the ACM network Ali and Gaby Rosenberg offer quick tips for big wins in understanding your money. The sisters are co-founders of the Blossom micro-investing app.
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Humans are emotional, not rational creatures, and where our attention goes, money flows. When you feel excited about an investment the biggest temptation is to match your enthusiasm by giving it everything you've got. That's how you maximise your returns, right?
Thinking "This is a sure-thing" can actually be the first red flag. As any good financial planner will tell you, diversification is a far better approach for maximising returns. That is, spreading your investments (and therefore your risk) across a wide range of different asset classes, for example stocks, bonds, real estate and more. At Blossom, we believe in it so much that we even encourage our own clients to invest with us as part of a diversified approach. A healthy, balanced portfolio brings a wealth of benefits, both for your peace of mind, and for your pocket. Here's why:
Your gains don't always come from the same place as your losses
You literally cannot win 'em all - not at the same time anyway. It seems counterintuitive, but by spreading your investments across various opportunities, especially ones that may fluctuate independently, you can manage a storm in one area in a much better overall position.
You reduce your exposure to risk, without sacrificing returns
By investing in a variety of assets that perform differently, you reduce the overall risk of your portfolio, so that no single investment can hurt you too much. This can actually improve your potential returns, smoothing them out and making them more predictable.
You can explore more
If you do have a bit of a taste for adventure, managing a diversified portfolio means you can also invest in different trends and opportunities across asset classes, geographic regions and individual investments as they come up, while still minimising the impact of any potential losses on the performance of your portfolio overall.
From an investment perspective, diversification is a wise strategy, some of the biggest benefits of a diversified investing strategy are mental. Managing personal finances is the number one source of stress in Australia, and less risk means less potential stress. Sitting on a healthy, balanced portfolio you'll be far better positioned for whatever life throws at you, and have the clarity to make the kind of smart decisions you can really get excited about.
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Sisters Ali & Gaby Rosenberg are the co-founders of Blossom App.
- Nothing in this article should be construed as being personal financial advice. It is general in nature only and has not taken into account your particular circumstances, objectives, financial situation or needs. You should consider whether the information, strategies and investments are appropriate and suitable for you or seek personal advice from a licensed financial planner before making an investment decision. Past performance does not indicate future performance. BlossomApp Pty Ltd (ABN 74 644 216 151) is a C.A.R. (No. 001284228) of Gleneagle Asset Management Ltd (AFSL 226199). Consider the PDS and TMD at blossomapp.com to ensure the product suits your needs.
- ACM co-owner Alex Waislitz has a stake in a company that provides services to Blossom. ACM is the publisher of this masthead.