Building a Diverse Portfolio: Exploring the Career Benefits of Freelancing
When markets are on a roll, it can be easy to overlook the importance of portfolio diversification. After all, if U.S. stocks are going up, most investors have a positive outlook on their investments and focusing on their financial goals. But when markets turn sour—as they have in the past two decades—it’s important that investors have the tools to protect their savings, and that includes ensuring their portfolio is diversified.
Whether you’re saving for retirement, buying a new home or looking to invest in something else, the right portfolio structure is essential. Diversification can help reduce the risk of a loss and may offer better opportunities to reach your financial goals.
However, the concept of diversification can be difficult to understand and implement, especially with the ever-changing economy and global economic trends. So to help you, we’ve compiled some of the top reasons why diversification is an important element of your investing strategy.
1. Freelancing can improve your skillset.
One of the biggest benefits of freelance work is that it forces you to hone your skillset and expand your horizons. If you’re working on a project that doesn’t seem to be making progress, or you’re feeling unsatisfied with the results, you can switch gears quickly and find another opportunity that suits your needs. This kind of flexibility would be nearly impossible in a traditional corporate job, where it may take months to get the go-ahead to change directions.
2. It can reduce stress.
For many people, a hectic job environment can create a lot of stress. This is especially true for those who are juggling multiple tasks and projects at once. Freelancing, on the other hand, can provide a more steady stream of income that can make it easier to balance life’s obligations. This can also help reduce your overall levels of stress, giving you a more well-rounded life and a greater sense of stability.
3. It can offer a higher risk-adjusted return.
Diversification has historically been linked to a better risk-adjusted return, meaning that you’ll make more money over time, even with higher risks. That’s because spreading out your wealth across a variety of assets will decrease the impact of any losses you experience.
If you’re looking for an easy way to diversify your investments, consider investing in managed products such as mutual funds and exchange-traded funds. These investments typically invest in baskets of securities, which can further reduce your exposure to individual stocks.
Depending on your investment horizon and risk tolerance, you can choose funds that are diversified by asset class, security duration, country and industry. There are also target date funds that will automatically shift your allocation away from stocks into fixed-income investments as you approach retirement age. By combining different strategies, you can create a well-rounded portfolio that can help you pursue your financial goals in 2022 and beyond.
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