The Laws of Wealth Are For Anyone - Part VII

These laws of wealth we have been looking at are both time tested and true. For the serious investor who follows them they will allow you to accumulate wealth over your lifetime that can last well into retirement.

Today I want to address the idea of protecting the wealth you have. If you concentrate solely on making money and not on preservation of wealth, you would conceivably lose the wealth you have accumulated thus far.

I want to give you a word to the wise today; diversification. In order to best protect your wealth, diversify, diversify, and diversify.

What do I mean? Don't put all of your eggs into one basket. No matter how well you understand an investment you need to apply the principle of diversification. Let me explain with a few examples;

1) Stocks - Try to look at stocks in various sectors (technology, financial, housing, health, etc). Then look for various companies in that same sector so that you can purchase shares in a variety of companies. Would you rather have 100% of your stocks invested in 1 stock or 10? Not only will diversification shield you better against market fluctuations but you can offset your overall risk by not being 100% in any one sector at any given time. Very hard for all sectors to be doing badly at the same time.

2) Real Estate - I have owned many different types of properties (single family homes, multiple unit dwellings, apartment buildings and office complexes. Each type of property is different and offers benefits to its owners. Yet single family homes are the best investments to have when you need to liquidate (easiest real estate to sell), apartment buildings are great for building a salary for yourself (due to many expenses being contained in one site as opposed to many buildings) and office complexes offer the best way to pass on building expenses to your tenants. Having a mixture of these types of properties in your portfolio can make your investments more sound.

3) Businesses - If you own a restaurant you may also have a catering business. Sometimes the best way to diversify is to add on other services to your already existent business model.

4) Insurance - There are many types of insurance to cover many different types of situations. Share the risks by having homeowners, auto, life and business insurance.

Invest in your financial future.