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Want More Diversity in Your Portfolio? Make These 3 Moves Now

By Maurie Backman - Sep 26, 2021 at 6:47AM

Key Points

  • A diverse portfolio could be your ticket to gaining wealth.
  • These investments make it easy to diversify.

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A diverse investment mix could make you very rich. Here's how to establish one.

You'll often hear that having a diverse portfolio can benefit you in several ways. For one thing, it can serve as a form of protection during periods of stock market volatility. It can also set you up to gain a lot of wealth in your portfolio over time.

Now there's no single definition of a diverse portfolio. Some investors are content with owning 12 or so different stocks, while others might own shares of 100 different companies. But if your portfolio isn't as diverse as you'd like it to be, here are a few moves to consider.

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Image source: Getty Images.

1. Buy some S&P 500 ETFs

ETFs, or exchange-traded funds, allow you to own a bucket of stocks with a single investment. They also entail a lot less research than buying individual stocks, so they're a particularly good choice for newer investors who are still learning the ropes.

If your goal is to further diversify your portfolio, then within the realm of ETFs, it pays to focus on those that track the S&P 500 index. That index is comprised of the 500 largest publicly traded companies, so it's a great way to get a piece of the broad market without having to purchase numerous stocks individually.

2. Look at fractional shares

The great thing about fractional shares is that they allow you to own expensive stocks without investing huge piles of money. When you purchase fractional shares, it means you own a portion of a share of stock, not a full share. That, in turn, allows you to buy a piece of more companies.

Fractional shares come in very handy when you're looking to own a stock like Amazon ( AMZN 2.80% ), which, as of this writing, is trading at around $3,406 a share. Rather than sink over $3,000 into a single share of one company's stock, you might instead opt to purchase one-third of a share of Amazon and spent the rest of your money on different companies.

Not all brokerage accounts offer the option to purchase fractional shares. But a growing number are making them available. If your brokerage won't allow you to buy fractional shares, you may want to look at moving your money elsewhere.

3. Dabble in REITs

REITs, or real estate investment trusts, allow you to invest in real estate without having to go out and purchase actual properties. There are different types of REITs you can buy, and many REITs are publicly traded, which means you can track their performance as you would for any given stock.

The great thing about REITs is that they tend to offer higher dividend yields than stocks. And because REITs' performance doesn't always tie directly to the performance of the stock market, they're a solid diversification tool.

Having a diverse portfolio can set you up for a world of success as an investor. If you think you need to branch out, consider adding some S&P 500 ETFs, fractional shares, and REITs to your personal mix. Doing so could help you enjoy solid gains in your portfolio over time and help you sleep better at night during periods of stock market volatility.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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