Today’s economy seems intent on squeezing small businesses, forcing many long-time business owners to pursue more investment opportunities to avoid closing their doors. Despite the less than ideal economic climate, you still have viable options. Here are five smart ways to diversify your stock portfolio in 2022.
1. Use Dollar-Cost Averaging
Dollar-cost averaging is a common investment strategy when an economy becomes unstable. Instead of buying a share based on its current price, you divide the investment into recurring purchases that continue for a time period of your choosing, regardless of whether the price increases or decreases.
This strategy has two benefits: reducing the effects of market timing and helping you avoid panic buying, a fatal investment mistake that often turns a portfolio from bad to worse. It also helps you get into the habit of buying fewer shares at higher prices, making your investments more cost-effective in the long run.
2. Explore Geographic Diversification
Portfolio diversification doesn’t just mean you should invest in different industries – it also means you should explore different locations. Other countries are growing faster than the United States economically and have plenty of alluring markets. Electronics in South Korea, oil in the United Arab Emirates and the IT sector in India are great examples.
You should also take a closer look at trending international stocks to help solidify your portfolio as the global economy becomes more intertwined. The U.S. won’t be an economic powerhouse forever, so it’s about time you look outside the borders for investment opportunities.
3. Prioritize Sustainability
Today’s average consumer is willing to pay more money for sustainability, according to a 2021 survey from the UN Climate Change Conference. That means small business owners must make sustainability a higher priority in their portfolios. For example, eco-friendly outdoor markets like camping have seen impressive growth and figure to keep expanding in the wake of COVID-19, as 64% of surveyed campers expect to take a camping trip this year.
Investing in energy conservation efforts and green technologies like electric fleet vehicles and reusable packaging can improve your portfolio and brand reputation at the same time. The markets for these new environmentally-conscious products and services won’t be cheap for long, so start investing now to get ahead of the pack and maximize your returns.
4. Hop on the Crypto Bandwagon
Despite its mountainous highs and bottomless lows in recent years, cryptocurrency continues to grow at a rapid pace and market analysts have some ambitious predictions for the near future. As an independent market with no ties to the traditional stock market, it can act as a buffer against inflation and help you see consistent returns.
Cryptocurrency is still wild and unpredictable, so investing small dollar amounts and holding for long periods is the best strategy. Invest in a few of the top currencies – Bitcoin, Ethereum, Tether and BNB are good places to start – endure the peaks and valleys, and keep waiting for the next massive spike to hit.
5. Invest in Fixed-Income Securities
To balance out crypto’s volatility and secure more finances, you should also invest in low-risk, low-reward fixed-income securities. Despite their low average returns, their stability almost guarantees a steady return. A security pays you a semiannual fixed interest rate typically in the form of corporate or government bonds, giving your income small boosts over time.
Despite the potential for consistent returns, current inflation and high interest rates suggest that now isn’t the most opportune time to invest. That’s where U.S. Treasury Inflation Protection Securities (TIPS) come in. TIPS automatically adjust for price increases, ensuring that your matured bonds will also be higher.
You can also buy fixed-income securities as certificates of deposit (CDs), money markets and preferred shares. The concept for all three is the same: in exchange for investing for a predetermined time period, the bank pays you a fixed interest rate. This strategy can be a great way to ensure extra income in this hectic economy.
Solidify Your Savings in 2022
In such an unstable economy with little room for error, every investment can seem like a high-risk, low-reward endeavor not worth pursuing. However, there are many diamonds in the rough, if you know where to look. Using strategies like dollar-cost averaging and expanding to new digital and international markets can help you diversify your portfolio and solidify your savings in 2022.
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