Diversification is one of the key requirements of long-term successful investing. Investing reduces overall portfolio risk and maximizes chances of better profiting from some investments. There are many portfolio classes according to the type of diversification they have.
- Aggressive Portfolios: This includes lots of risky financial instruments like stocks, options, and equities. The instruments can be highly volatile and risky. Can also include active trading strategies like day trading and shorting. Good financial management, keeping losses to minimum levels and timely withdrawal of profit are keys to success with aggressive portfolio.
- Defensive Portfolio: Includes investing in low risk investments like treasuries, bonds and commodities. Can include low volatile and established blue-chip company stocks and the investing strategies are usually long-term ones.
- Speculative Portfolio: This is a very high risk investment portfolio which includes investing in new stocks, emerging companies, IPOs and complex options. This can also include utilizing high leverages. Investors should be highly trained and planned for managing such a portfolio.
- Income Portfolio: This is a portfolio where the investor looks for constant cash-flow in form of dividend, interest or return. This include investing in companies, equities, currencies, bonds and funds that has very good history of offering constant or stable returns.
- Hybrid portfolio: these include opting for more than one type of instruments in a portfolio and keeping the portfolio highly diversified. The level of diversification can be slightly aggressive or defensive according to the risk tolerance and investing goals.
This blog is written for Orient Financial Brokers, a leading online forex, gold, stock and CFD trading broker in Dubai, UAE offering a range of tools for investing the money.