How to Diversify Our Portfolio

1. Maintain a balanced allocation of assets:-

That is, don't put all of your eggs in one basket. You can reduce your risk of losing money by spreading your investments over a variety of different commodities and commodity-related securities.

2. Don’t hold too much of your money in single commodity:-

In general, investors are advised to only have about up to 10% of their total assets invested in commodities. Any more introduces your portfolio to unnecessary risk that can be reduced by staying in safer areas of the market.

3. Rebalance your portfolio periodically:-

While many attempt to time the stock or commodity market, research shows that this approach is rarely successful over the long-term. Instead, examine your allocation 1-2 times per year to determine if rebalancing is warranted. That is, sell from those holdings which have a gain and buy shares of those which have lost value. Doing so, achieves selling high and buying low as well as keeping your portfolio in balance its will be profitable .

4. Spread the Wealth:-

Equities can be wonderful, but don't put all of your money in one stock or one sector. Consider creating your own virtual mutual fund by investing in a handful of companies you know, trust and even use in your day-to-day life.

But stocks aren't just the only thing to consider. You can also invest in commodities, exchange-traded funds (ETFs), and real estate investment trusts (REITs). And don't just stick to your own home base. Think beyond it and go global. This way, you'll spread your risk around, which can lead to bigger rewards in your portfolio.
Still, don't fall into the trap of going too far. There's no sense in investing in 100 different vehicles when you really don't have the time or resources to keep up. Try to limit yourself to about 20 to 30 different investments.

5. Keep Building Your Portfolio:-

Add to your investments on a regular basis. If you have $10,000 to invest, use dollar-cost averaging. This approach is used to help smooth out the peaks and valleys created by market volatility. The idea behind this strategy is to cut down your investment risk by investing the same amount of money over a period of time. Using this strategy, you'll buy more shares when prices are low, and fewer when prices are high this is the best way.