If you want to be rich, you need to start diversifying where you are investing your time and money so that you can increase your odds of being successful. You probably aren’t thinking about diversification because you don’t have that much money, but whether you have 1000 dollars or a million, you can be diversified.
But before I go into different ways you can get your hand into a lot of cookie jars, here are some diversification strategies that you need to know about:
- Don’t put all your eggs in one basket – this may seem like a simple concept to understand, but most people put all of their eggs in one basket. For example if you buy 10 rental homes, you are putting all your eggs in the real estate basket even though you own 10 homes and not just 1.
- Don’t get too greedy – no matter how good an investment looks, never put all your money or time into it. Keep in mind if you decide to be greedy all it takes is one unforeseen circumstance before you lose your shirt.
- Slow and steady wins the race – if you have $10,000 to invest, don’t spend it all right away. You don’t know what opportunities lie ahead so make sure you spread out your money so that it lasts around 5 years. Hopefully by the end of 5 years you will start seeing a return on some of your earlier investments.
- Cash is king – you don’t want all of your money tied up incase you need it. Due to this you want a percentage of your investments to be flexible enough where you can pull out your money whenever you need it. For example if you invest in a stock, you can sell it whenever you need money. On the other hand if you invest in a home you can still sell it or refinance it if you need money, but it may take some time to do so.
Now that you understand the ABC’s of diversification, here are some ways you can have your hand in multiple cookie jars:
- Why have 1 job when you can have multiple jobs – working for one company can be very risky. For example who would have thought companies like Lehman Brothers would ever go bankrupt? A good way to protect yourself is to take on consulting gigs on the side of your 9 to 5 job. For example if you are a marketer for Ford Motors there isn’t any reason why you can’t help a financial or furniture company with their marketing. The basic principles behind a profession can usually be applied to multiple industries.
- Your time is worth more than just money – when you spend a few hours helping a company, you will usually receive cash compensation for your time. Instead of taking money from various businesses, why not take equity? Having equity in companies that you believe in is never a bad thing. In the short run you may not make much money by doing this, but in the long run you can make a lot more.
- Investing in the stock market doesn’t have to be expensive – there are a lot of people who make money by investing in penny stocks. Just look at Timothy Sykes who turned $12,000 into $2,000,000. If you don’t know much about the stock market, don’t worry; there are a lot of blogs that give stock tips.
- Real estate can be affordable – no one says you have to buy an investment property in California. There are properties out there that you can buy for 50 or a 100 grand. The way rental properties work is that if you buy a place for $50,000 and put a 20% down payment, you’ll end up paying $10,000 for a place that is worth $50,000. The rental income that you receive every month should pay for the mortgage payments and after 30 years the home should be paid off. 30 years later, hopefully the home is worth $150,000. So if you decide to sell it, you’ll end up with a profit of $140,000 because initially you only invested $10,000.
- Look beyond the horizon – countries like India and China are growing at a rapid pace. The cost of a business overseas can be cheap and lucrative. If you are interested in investing in oversea opportunities you may want to consult with a financial advisor so he or she can help you find these type of opportunities.