by Erik Van Tongerloo

Created on: November 04, 2009   Last Updated: March 08, 2010

How you diversify your investments is an important issue if you want to reach high returns and avoid losing all your money. Everyone knows the popular proverb" Don't put all your eggs in one basket" and it is really important you keep this rule in mind. It is not only a matter of diversification in your stocks but you also need to diversify in the different investment instruments.

Economic, political and some other factors may decrease the value of one or even more investment instruments but it is possible your other assets are increased and with a good investment plan, you will always win in the long run. A mutual fund may seem the best investment instrument to diversify your investments; you can find alternatives which give you a better performance.

Investing is a necessity in today's world and there is no magic formula which works for everyone. Some people may possess more money to diversify but there is always a way to diversify your assets. Research, knowledge, your financial goals and often some advice can help you to make the right decision how to diversify your investments and to reap maximum profit in the long run. If you are in doubt or you feel uncertain about certain investment instruments, you can best make an appointment with a financial planner or an independent financial advisor.

How you diversify your investments is an individual choice and depends of your income, age and risk tolerance. You need investments for short-term and long-term goals and it is wise to compare all the different kinds of investments and diversify in these assets. Here are some ways to diversify your investments but you don't need all of them to make the right mix:

*Stocks

Stocks are popular investment instruments but you need to be aware you never know you will ever reach profit with stocks and the risk of losing money is high. Diversification between your stocks is certainly necessary if you want to reach a good return on the long run. Knowledge is certainly important and check the solvability of the company before you invest in certain companies. We all know that every company can go bankrupt and diversification between the stocks is a necessity to avoid a financial disaster.

It is best to mix between small caps, mid caps, large caps, emerging markets and in different sectors. If you do your homework and you invest in solvable companies, you will likely reach a higher return than the best online savings accounts. It is recommended to invest

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