Welcome to part two in our special five-part series which explores the unique financial landscape that is a career in information technology and uncovers some wealth management strategies that will help you do more with your money.
In the initial part of this series, we discussed cashflow management, in this second installment we will be exploring the what, why and how of diversification.
Top six issues when managing your money
Diversification
Tech professionals need to proactively avoid becoming overly concentrated in the tech sector with their investments. It’s quite typical for a tech professional to have a salary, bonus, and company shares all from a tech industry source, and often, it’s the same organisation.
“What’s comfortable is not the right way to invest. You must own things that you’re uncomfortable with.
Otherwise you’re not really diversified.” Peter Bernstein
The risk of “having all your eggs in one basket”
Whilst “having all your eggs in one basket” may represent significant opportunity, it also conversely represents significant risk, one that is further amplified in households where both partners work in the IT sector.
Although it’s human nature to stick with what you know and are comfortable with, the opposite is true when it pertains to investing, here, diversification is key.
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The benefits of diversification
Diversification reduces your portfolio’s risk without sacrificing the performance of your portfolio. It is the process of investing in a mix of asset classes, industries, geographic regions and more in order to minimise the impact of one of the investments performing poorly. For example: if the IT sector performs badly, this underperformance may be counter balanced by a strong performance in an alternate sector such as pharmaceuticals or banking.
Therefore, even though tech stocks are growth stocks, a well-diversified investment portfolio contains a balance of growth and value stocks to help you accomplish your investment goals over the short, medium, and long-term.
Grow your wealth with tailored advice
Here at Profile Financial Services we can help you grow your wealth with an investment portfolio that is tailored to your unique goals and timeframe. Our advice philosophy is goals based financial advice.
Stay tuned!
Next, we will take a look at tax minimisation and reveal two of the most tax-effective investment vehicles that can simultaneously help you minimise your tax and invest for your future.
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