At a time when the market is giving high returns, setting new records, you may think it is easy to invest and earn the maximum. However, it is not that easy. Selling or buying an investment product requires perfect knowledge for that particular market or industry. Following others or a pattern, lack of knowledge, no proper calculation etc. are some of the factors that stop you from earning more. One can never be sure of what the market will do at any moment. To deal with this problem, an individual should diversify his/her portfolio. A well-diversified portfolio in any market condition can easily handle volatility. 

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What is Diversification?

Diversification is a one-stop solution suggested by financial planners, fund managers, and individual investment advisors. It is a financial management strategy that spreads your money into different areas, providing it ample chances to grow without hitting down with the volatility in one or two investment options. The idea behind diversification is that a variety of investments will yield a higher return, lowering the overall volatility. It also suggests that investors will drive a lower risk of losing money by investing in different instruments.

1. Break the pattern:

There is no specific pattern for growing money. Hence, the first move for an ideal portfolio should be to break the pattern. Stop denoting equal shares to each investment area you like. A 25 per cent in gold is probably too much, while 25 per cent in property or real estate will be much lesser. It is important to know your appetite and spend accordingly. Research, study and listen to yourself before investing.

2. Watch additional charges:

It happens many times when we do not really take care of the additional charges like commissions, taxes, penalties etc on our investments. The person should be aware of all these things as it can hamper your returns in the long term. 

3. Be watchful with your risk appetite:

It is said, 'Higher the risk, higher the return' but one should remain watchful when it comes to financial or risk taking capacity. Not everyone can become a Warren Buffett, so invest wisely. To decrease the chances of volatility in your portfolio, you can invest in different areas or options. Allowing your portfolio, ample space to grow.

4. Don't follow others:

The right path for a rich man could be the wrong one for you to follow. What he did in 1990, cannot be proven right in 2019 because the time is different, the person is different, the market has changed, the government has changed, laws are new. Hence, go through the investment related terms and conditions and listen to your instinct, do not copy others in the market.  

5. Learn about entry and exit:

There is a right time to make an entry and exit from the market. Warren Buffett once said, ''when others are greedy, you stay fearful; when they are fearful, you become greedy''. The statement says it all, the person should enter the market at a downward or negative phase or vice versa in case of an exit. This will ensure you the highest returns possible.