Smart investors know that it takes a diverse portfolio to receive the best investment returns. After all, holding stocks across a number of countries and sectors gives you a better chance in investing big than you would if you only purchase a few stocks in a single industry.

Why? Remember, putting your bets in more than a single economy can be a recipe for disaster especially if you happen to be new to the investment game. Let’s see how you can expand your portfolio and your prospects –

1. Invest in another Economy

Just because you live in Canada doesn’t mean that you only limit your choice of investments to local markets. Canada’s market is composed of three major industries –

1. Resources
2. Financial
3. Materials

A Canadian fund will either have one or all of these sectors covered. However, if you want to expand your portfolio, you need to explore international options as well. For example, you can search for potentially profitable opportunities in US healthcare or technology.

Depending on one country might be a safe option, however, exposing your choices to more than one country will provide you access to better prospects. Remember, global markets are more correlated now than they were before. The more economies your portfolio covers, the better your chances are of bouncing back if one of them happens to fail.

1. Get to Know Asset Classes

A diverse portfolio holds more than just equities. The smart investor knows about the value of asset classes and ensures that his portfolio includes assets such as bonds and stocks. Experts also recommend that a portfolio should include gold since the market value of the commodity rises as stocks fall. You should be well aware of the rates of return that you should be expecting from the different classes.

Of course, investments can be vulnerable to market volatility. As an investor, you cannot afford for your stock to lose value once the market turns for the worst. However, you can protect yourself against certain incidents such as inflation by using a well diversified set of asset classes.

2. Other Sectors

Speaking of market volatility, it will be in your best interest if you spread your choices across sectors. A certain type of sector may do better than others depending on the state of the economic market. For example, inflation may compel people to save or wait before they have a considerable amount of funds to purchase new vehicles. The auto sector may feel the brunt of their decisions during times such as these.

Successful investing and diversification go hand in hand. While opting for a single economy or asset class maybe a safe option, it will hardly give your portfolio the opportunity to flourish. You run the risk of losing it all if the specific industry you put all your hopes in crashes. After all, there is no telling when the financial tide may turn for the best or worse. Fortunately, some info about the prospects that are available to you and a little bit of caution is all it takes to invest successfully or develop a portfolio that covers a variety of assets.