The stock markets have reached a handful of unprecedented highs during the past four fiscal quarters. In fact, many analysts are predicting a bullish year ahead. This perspective has enabled some investors to believe that a single income stream will be able to stave off any potential financial pitfalls or market “hiccups.” Unfortunately, this is hardly the case. Time and past experiences have both proven that diversification is one of the best ways to avoid any unexpected surprises. If you are considering such a move, it is wise to understand the logic behind this strategy adequately. Why should you embrace a more flexible approach when generating an income stream?
The Looming Uncertainty of the Brexit
It seems as if the European Union is bolstering its contingency plans for a no-deal outcome on the looming Brexit. Considering that there are only months left to secure a deal, the future of certain market sectors is now being called into question. It is not unreasonable to assume that a no-deal scenario will negatively impact the economy of the United Kingdom (from a short-term point of view). Those who are able to diversify their sources of income are more likely to be able to supersede any volatility that could soon follow.
Pragmatism as Opposed to Idealism
Idealism is a dangerous mindset to embrace within the world of finance. After all, the markets are cyclical in their nature and what increases in value will sooner or later experience a recorrection. This is why it is better to embrace a pragmatic point of view from the beginning. Relying upon a single source of income is akin to skating on thin fiscal ice. It is inevitable that the bears will overtake the bulls at some point. Adopting a diversified portfolio will enable you to rise above the doldrums that might be associated with a specific sector. This brings us to the next main point.
The Power of Electronic Trading
No longer will novice investors be forced to deal with middlemen such as wealth managers and similar professionals associated with significant commissions and fees. There are now numerous agile software applications which will provide the insight and clarity required to make important decisions when the time is right. For example, the CMC Markets trading platform enables you to access a plethora of assets and investing instruments within a matter of seconds. Some possibilities include:
- Forex positions
- Spread bets
- Contracts for the difference
It is also necessary to highlight the fact that the platform itself is built around the needs of the end user. Intuitive instruments, a host of virtual tools and access to 24/7 help is available when you need it the most. There is simply no substitute for such amenities within the digital investment community.
The Power of Planning Ahead
Diversification has often been misinterpreted as representing an entirely conservative approach. On the contrary, all of the most successful investors have embraced this concept for decades. The best way to avoid any surprising outcomes tomorrow is to plan ahead today for what the future may hold. Thanks to the proprietary tools available at CMC Markets, such objectives are now much easier to achieve.