Diversification is the Best Way?

Updated: 09/07/2006 07:31
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diversification best way
Diversification as a gold rule for HYIP investing in general. Ways to diversify your investment portfolio and benefit to the utmost.
This precious word is listed as number one almost in all investment strategies and recommendations. Distributing one's funds among various programs is really a good tool for security provision. But is it really so? Is diversification really reliable and universal as to deserve so much attention and NECESSARY implementation?

Of course, diversification advice recommending it as the primary method of providing security is based upon a wealth of experience and various mistakes. So we are sure that diversification is really a pledge of your success. But we also may say for sure that it may bring a lot of trouble if you use it wrong.

Diversification as it is understood at HYIP market means that you invest your funds in many projects at once, thus “spreading” the threat of losing your money. If you have $100 you invest it to different 10 projects giving $10 each instead of investing the whole sum into 1 project.

Unfortunately, this oracle has one drawback. It is as follows: you increase your risks while diversifying your funds. If you invest into 10 projects you make your risk 10 times higher. Of course, this shouldn’t be treated as a pure math, you cannot just multiple. But here is an important succession here, which cannot be neglected.

If you hope that just spreading your funds will decrease risks, you are mistaken. Risk won’t be decreased, it will grow, because a few programs from these ten you invested in will SURELY become scam, as 10 program are not a program. But this risk will be DIFFERENT.

And this is the sense of diversification method. When you invest into a few programs, you do not lose THE WHOLE sum. And this is the pledge of diversification and “perfect” investment strategy. Having secured your rear, you may move forward, even if one of those you gave your funds to falls down.

But you should remember about interests. And this point is important for proving our opinion that diversification is just another problem solution and it should be understood while implementing it.

While diversifying your funds, you not only keep them safe from unnecessary problems, providing yourself a chance even in case some of those programs are SCAM at the same time, you spread your profit as well, and having lost $10 of $100, you would receive only $0.9 (is you receive 1% daily). Accordingly, to compensate $10 you lost you should not only refund your initial deposit but also add $10, which is more difficult under such circumstances.

Accordingly, you receive the rest of your funds even after loss, but thus you don’t receive universality, and we are sure that investors should mind it. Thus, investing $100 in a good program once you may hit the mark and receive a good profit. But do not let diversification rule drive you limitlessly. As you see, this is not the best alternative. We hope, you understand it as well.

In each separate case one may use an unusual diversification method, and the first line offering diversification in any advice doesn’t necessary mean that this is your clue. Even if this solution has been dictated by experience.

You’d better drive your efforts to the search of the only one, and restrict you in your diversification. Otherwise you may push yourself to the limits (investing into one program, or, on the contrary, when you cannot control funds coverage), and risk will be determined by an individual risk of your each separate deposit. Be clever.


About the author

Nicole Berger has over seven years experience writing and editing for online and print media. She has held various editor and associate editor positions in some of forefront independent media publications. A consistently dependable team player, I thrive in a high-pressure environment, enjoy the challenges of meeting deadlines and managing a team, and am comfortable researching, writing and editing on a wide range of topics.
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