Creating a Diversified Income Portfolio

Diversification is spreading your investments across sectors and risk levels. It is important so you do not lose all of your money if a certain industry crashes.

For example, if you had all of your money invested in hotel and travel companies when the Covid-19 pandemic hit, you would have lost all of your investments from the industry collapsing. However, if you had invested in utility and healthcare companies as well, they could have compensated for your losses and you’d still have dividends coming in.

When diversifying your investments, also mix high yield and high growth stocks. Include dividend aristocrats, kings, and lesser known companies with potential. Also make sure you have a balance of defensive(utilities, staples, healthcare) and cyclical sectors(discretionary goods).

Source: Warrior Trading