Investors already know that diversification is a great way to reduce the risk they face without lowering their expected returns.
Investors have, long known of this theory, we have been saying it for centuries – “Don’t put all your eggs in one basket”. However, this can a misinterpreted strategy which can have costly effects on portfolios.
Diversification offers investors a way to limit the risks their investment portfolio is exposed to without reducing their overall returns. By adding more into their portfolio, investors are able to reduce the risks they are facing, known as specific risk, this can be reduced through proper diversification into areas you understand or want to have from Property to Art.
If you invest into the stock market, companies may go into insolvency because of cashflow problems, for sectors, this may include the companies in the property sector suffering after a hike in interest rates or new government policies; for countries and regions, this may include a natural disaster affecting companies in certain geographic areas. Diversification works because investors would not lose all of their investments in the event that one company in their portfolios is adversely affected. So having other tangle alternatives like Art can be an alternative form of wealth that appreciates in value and will not be affected by any interest rates or recessions as much as traditional forms of investments would be.
The rise in interest rates, the risk of natural disasters, companies that are listed can have effects on other subsidiary companies they own are all but some of the fundamentals of how much risk can affect your future share price and dividend payments, We find Art should be considered with great care and attention, if you know what you like buy what you enjoy, historically art has flourished against the stock market and other financial assets, investors have taken an appetite for purchasing master prints know as Artist Proof’s including buying pieces from an artist before they go to the exhibition can have staggering results on your investment, but it can be very easy and confusing to get lost in the worlds of Art investing, risk comes from not knowing what you are doing after all.