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The Importance Of Diversifying Your Investment Portfolio

Visualize yourself in a supermarket. You’ve been thinking about doing groceries for 2-3 days. You’re wearing something comfortable. You have a list in your hand, on your phone, or have certain things in your mind. Now, have a look at your basket. How does it look? Milk, muesli, shampoo, fruits, moisturizer, etc. Quite colorful, with a lot of variety, one thing over the other. Blue, white, pink, red. Right?

Now, think of this basket as your investment portfolio. Diversified, full of variety, one over the other, you have an idea of what is where but not precisely, probably colorful! Let us discuss the diversification of investment portfolios in detail. 

Diversification of your investment portfolio: 

Putting your money in different channels, asset classes, or mediums within the same asset classification is the diversification of your financial portfolio. 

Take the same example as earlier. Visualize your shopping basket again. This time, think of it as only white color or just one pack of a product. Now, that is correct too. There is nothing wrong with it. But this time, all your needs are not satisfied. This one product is not going to fulfill all your monthly needs. You just ran out of this product; this is why you’re buying it. But as said, you cannot run on the same. You need to add more color and variety to your basket. Now, let’s see how doing so would benefit you.

Advantages of diversifying your portfolio~

  1. Risk Management: Remember the saying, “Don’t put all your eggs in one basket.” Again a basket! The reason behind this saying is that if the basket falls by mistake, you don’t break all your eggs. You still have some good ones left. The same goes for putting your money in different asset classes. If one of the vehicles doesn’t perform well, you still have regular returns from other sources. 
  2.  Financial Progress: If you allocate your money to various sources, then no matter what, one alternative will give you regular or higher returns. So, the growth prospects are higher with diversification. 
  3. Something to fall back on: Let’s just all agree it helps to have a plan B. And with diversification, you don’t just have that security that you will get regular returns; you will always have something to fall back on.
  4. Higher risk-taking ability: When you have security on one end, it automatically reflects on another. Thus, when you have regular returns coming in from multiple sources, even if you are falling short on other ones, you will still have that sense of security which will help you take higher calculated risk wherever needed. 

Now that we know the benefits of diversification, we should also consider the other side of it, the risks associated with the diversification of your portfolio. Let’s move to our next section. 

Risks associated with diversification of your portfolio~

  1. Not everyone is an expert: Investments are a world of their own. Each asset classification comes with its own set of rules & compliances. To make the most of each asset and earn the maximum, we need to have an intensive understanding of each asset. Otherwise, we need to hire an expert and pay them to do the same. So that is a limitation on its own.
  2. Increased scope for mistakes: They might say The more, the merrier. But it necessarily doesn’t apply to diversification. When getting the hang of a single investment is so complex, leave alone investing in multiple asset classes. Thus, diversification naturally increases the scope of making mistakes. And a silly mistake might cost you a fortune sometimes!
  3. Tax implications: Where taxes are a complex phenomenon on their own, the tax implications proportionate to the diversification make it more complicated. And for a regular client or for someone who is just looking to make more money has to sign up for this additional headache unnecessarily.

These are the limitations that come along with diversifying your investment portfolio. Now that we know what portfolio diversification means, why we do it, and the merits and risks of portfolio diversification, we should next see how diversified our portfolio should be. 

How diversified should your portfolio be? 

A generally accepted good way of allocating funds is subtracting your age from 100 & whatever remains should be the stocks’ percentage in your portfolio. For example, if you are 20 years old, then 100-20 is 80. According to this way of fund allocation, you should hold 80% of your capital in the stock asset class, and the rest should go into the bonds classification. On the other hand, 65-year-olds should decrease their risk exposure; their stock-bond allocation would be 35:65.  

But as they say, one size doesn’t fit all. The same goes for diversification as well. So, to answer the question of how diversified your portfolio should be, the ideal answer would be to find an equilibrium between your desired returns and how many investments you can manage. Thus, whatever suits your profile is how diversified your portfolio should be. 

So, we have covered nearly all the aspects of your basket. Now, have you ever wished there was something that could help you assess the risk associated with your portfolio or something that could give you a picture of what is in store for your investments after a year or so? 

Well, you have arrived at the right place. https://calculator.secvolt.com/ can be your solution if you want. The purpose of this premium risk assessor is to give you a clear picture of the inherent risks associated with your portfolio. When you enter your details, you don’t just assess the risks but also see what returns your investments could gain. The tool shares a detailed report of the same with you to serve you the best. 

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Ashish Verma

Ashish Verma is the founder and CTO of Secvolt, with close to 10 years of experience in the IT industry. He has been the technical backbone of the company and has worked tirelessly to make the technical infrastructure robust. He is a passionate entrepreneur who generates solutions that have the potential to bring change.

In order to ease the client’s interaction with Secvolt, he has strived to develop the business’s technological foundation and establish a user-friendly platform. Ashish has also contributed substantially to smoothening the company’s administration and ensuring that there are no lacunae in the broad structure of the organization. 

Early Years

Coming from a middle-class family, he was aware of the problems that people faced while using technology. He sought to create something that was simple to use yet had a powerful effect. As he studied computer science, he became eager to offer a solution to real issues. He began his professional career at Amdocs, where he gained expertise in client management while catering to more than 20 clients. Later, he moved to Citicorp, where he had exposure to the investment industry. His time at Amdocs and Citi enabled him to produce high-standard, efficient, and scalable technical infrastructure.

He left corporate jobs for his startup because he was passionate about working on the concept of a smart city platform. He expanded the concept internationally and even collaborated with Global Dignity-Kuwait. Things didn’t work out for him the first time. He states, “My failures didn’t stop me from experimenting and trying new things.” He rose from the ashes like a phoenix and founded FewerClicks, an End to End IT solution company.

He worked on the creation of Solster Finance, a decentralized financial platform based on the Solana blockchain. He created this platform single-handedly which has helped the team raise a $1M investment and a revenue of more than $5M within 6 months of launching. 

He has previously worked on many blockchain technologies and cryptocurrency ventures, which include Decentralized Finance Applications (Defi), Decentralized Applications (Dapps), File Contracts (SIA, record-keeper), Smart Contracts (rust, solidity), and NFT Development. His experience and effective communication have helped many team members understand Secvolt effectively and the underlying technology it is powered by.

He possesses the ideal combination of strategic thinking and excellent business insight. He is responsible for formulating technical aspects of the company’s strategy to guarantee alignment with business objectives. With his drive to experiment with new technologies, he has helped Secvolt achieve a competitive edge. Being in charge, Ashish never holds back in encouraging the different departments to make profitable use of technology, helping to grow as an unstoppable team at Secvolt!

Hanif Shaikh

Hanif Shaikh is the founder and CMO of Secvolt, with over 8 years of experience in the industry. He plays a crucial role when it comes to the growth of Secvolt. Since the beginning, he has acted as a mentor for each and every employee of the company, and he makes an effort to be accessible to his staff anytime they need him. 

Hanif first entered the Blockchain and Crypto world in 2016, and nothing has stopped him since. He views blockchain as a transparent platform that provides authority and accountability back to the people. He consistently believes that “overcommunication is better than miscommunication.” He has lived by this motto with his staff, clients, and networks.

Early Years

Hailing from Gujrat, a state in India, he is following his dream to contribute to making this world a better place. In the process, he has struggled, made some mistakes, and learned lessons from those mistakes to achieve success in life. His entrepreneurial attitude dates back to his childhood when he learned from his father’s business and aspired to have it all. He came from a humble background and had ambitions to succeed in life.

He has developed two successful businesses from scratch, and in the process, he has inspired young people to start their own businesses. He was an integral part of the Quora Mumbai Meetups and helped it become a great success in a short period of time. Later, he began organizing meetups to raise awareness about blockchain, cryptocurrencies, and their applications. He also shared his knowledge of ICOs, highlighted reputable ICOs, and established a small cryptocurrency community on WhatsApp groups.

He chose to go on a Blockchain Tour in India in 2019 and met some fascinating people. Throughout his journey, he has been able to build an extensive and robust network that has aided Secvolt’s growth. Because of his expertise and understanding of the Crypto Industry, he has been featured on several news channels and has advised the youth on the subject.

He is in charge of the company’s marketing operations and is responsible for developing its marketing strategy and vision. He oversees a group of passionate marketing professionals and plans promotional strategies with the goal of making  Secvolt a global brand. 

He is a perfect blend of a practical attitude and innovative business acumen. He believes in the ability of individuals to perform exceptionally well when given an environment to experiment and explore their passions; a culture that he has built at Secvolt.

Divakar Choudhary

Divakar Choudhary is the founder and CEO of Secvolt who has been trading for more than six years now. He started the business in 2018 with the conviction that if anybody could dominate the market, it was him. He poured all of himself into the business and turned Secvolt into a market-beating machine.

Divakar developed the fundamental quant models that perform risk management and capture alpha using his skills from the previous organization and his time spent in the market. In order to make the system effective, he backtested risk mitigation algorithms and worked on them for more than 4 years to produce results.

Early Years

He began his crypto journey in 2013 after getting his first gaming Laptop and melded in with the Blockchain community like sunbeams on the ocean. He created many YouTube channels at the age of 15 and businesses by the time he was 17. Technology has always piqued Divakar’s interest. He endeavored and succeeded at freelancing in his effort to achieve financial independence. However, he soon realized that freelancing would always keep him in the rat race, and the only way out would be to build a machine yielding generational wealth.

Soon, he started trading using his own capital but suffered a loss in the market. He says, “95% of people lose money & the rest 5% make money from the loss of those 95%.” He then began working on an effective technique to be included in this 5% after losing part of his own assets during the early stages of trading. He began evaluating quant strategies using statistical models.

With his methodology, he once produced a 20% ROI in a single month. With the zeal of creating something exceptional, he borrowed money from friends and family and generated decent returns for them using primitive quant models. Month after month, the system’s efficiency and the competence of the man behind it allowed for excellent market returns.

In the beginning, Divakar worked on his laptop for over 18 hours. It took every ounce of his energy as he executed about 530+ deals daily for 4 years to create this company from the ground up. In 2021, he increased his volume by 827%, trading a total of $52 million and hitting a single account.

In his words-

“What does becoming “THAT” GUY mean to you? Who did you need when you were young? Be that person!”

He is a perfect example of someone who followed his passion and made a fortune from it! He dreamt of creating generational wealth as a youngster, envisioned it as an adult, and is now making it a reality with Secvolt!