Diversification In Investing Always Makes Sense

Wednesday, April 27, 2011, 2:00 AM | Leave Comment

According to the Federal Reserve’s Flow of Funds report, household net worth – the difference between the value of assets and liabilities – was an estimated $56.8 trillion at the end of the fourth quarter of 2010, up about $2.1 trillion from the end of the previous quarter.

The value of corporate equities owned by American households increased by $1 trillion during this period.

Diversification In Investing Always Makes Sense

The 10.2 percent increase in the Standard & Poor’s 500 Index last quarter helped boost household wealth that remains about $9 trillion below pre-recession levels.

Declining home values and unemployment near 9 percent are prompting Americans to increase savings and cut debt, curbing spending now while building a foundation for future growth.

We know the economy is on the recovery path albeit rather slowly. Some experts say the recession will never end but it will be at a level that an overwhelming majority of Americans will not be affected by it.

When will the recession end completely? Will we ever be able to retire? Will we be able to stay in our homes next year and beyond? What are we supposed to invest in now? These are questions that create anxiety among most Americans.

Granted no one has answers to these and other financial-related questions, however, there are certain steps we can take to ease the burden of this rather lousy market in our personal finances.

If you have some money to invest, diversification is more important now than ever before. It is absolutely essential to minimizing risk and emerging from a down market relatively unharmed.

In a Nutshell
Do think about the fact that your financial situation can change really quickly. It has changed for the worse the last couple of years for most Americans.

Diversification makes more sense now than ever before.

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