When most people think of diversification, they think of a “well-diversified” portfolio of stocks, bonds, and mutual funds. I think of diversification quite differently.
My overall strategy for diversification is based on several things, including:
- My lack of trust in any one person
- My lack of trust in any one company
- My lack of trust in any one asset
- My lack of trust in any one strategy
- My desire to hedge my bets against economic downturns
- My desire to participate in economic upturns
I invest in several different assets classes other than stocks in an order to diversify my overall investments. The asset classes I generally invest in include real estate, farmland, p2p lending, cryptocurrency, precious metals, and stocks.
Within each asset class, I further diversify:
- Across multiple companies
- Across multiple platforms
- Across different formats or types
For example, for my stock investments, I diversify as follows:
- Multiple types of stocks, including:
- Index funds
- Growth stocks
- Dividend stocks
- Multiple (manual) investing platforms and brokerage accounts, including:
- M1 Finance
- TD Ameritrade
- Multiple robo-investing platforms, including:
- Schwab Intelligent Portfolio
With real estate, I diversify my investment like so…
- Multiple companies and platforms, including:
- Individual REIT stocks
- Multiple types of real estate, including:
- Student Housing
- Senior Housing
- Manufactured Homes
- Storage Units
I would consider myself to be hyper-diversified when it comes to investing. While some may see that as overkill, I think it to be a wise method of protecting myself against a collapse or crash of one particular company or one specific asset type.
Hopefully this gives you some fresh ideas on how you can diversify your overall investment strategy.
I cover my diversification strategy, the assets that I invest in, and key factors in achieving financial freedom and wealth in my book Perpetual Wealth.