• Contact Us
  • About Us
  • Advertise
  • Donate
  • Login
Watchdog Uganda
  • Home
  • News
    • National
    • Politics
    • World News
    • Media Outreach Newswire
    • Africa News
    • Tourism
    • Community News
    • Luganda
    • Sports
      • Football
      • Motorsport
  • Op-Ed
    • #Out2Lunch
    • Conversations with
    • Politics
    • Relationships
  • Business
    • Agriculture
    • CEOs & Entrepreneurs,
    • Companies
    • Finance
    • Products
    • RealEstate
    • Technology
  • Entertainment
    • Lifestyle
  • People
    • Showbiz
      • Salon Mag
  • Special Report
    • Education
    • Voices
  • Reviews
    • Products
    • Events
    • Hotels
    • Restaurants
    • Places
  • WD-TV
  • Donate
  • China News
No Result
View All Result
  • Home
  • News
    • National
    • Politics
    • World News
    • Media Outreach Newswire
    • Africa News
    • Tourism
    • Community News
    • Luganda
    • Sports
      • Football
      • Motorsport
  • Op-Ed
    • #Out2Lunch
    • Conversations with
    • Politics
    • Relationships
  • Business
    • Agriculture
    • CEOs & Entrepreneurs,
    • Companies
    • Finance
    • Products
    • RealEstate
    • Technology
  • Entertainment
    • Lifestyle
  • People
    • Showbiz
      • Salon Mag
  • Special Report
    • Education
    • Voices
  • Reviews
    • Products
    • Events
    • Hotels
    • Restaurants
    • Places
  • WD-TV
  • Donate
  • China News
No Result
View All Result
Watchdog Uganda
No Result
View All Result

HASSAN KITENDA: Why its necessary to diversify your investment club’s portfolio?

watchdog by watchdog
5 years ago
in Conversations with, Op-Ed
3 0
Hassan Kitenda

Hassan Kitenda

ShareTweetSendShare

If you’re an investor, diversification is a topic that’s impossible to avoid.

Diversification is one of the cornerstones of traditional investment advice. You may have heard of the statement, don’t carry all your eggs in one basket. The investment term to describe carrying your eggs in many baskets is portfolio diversification. In investment and indeed in all walks of life, that statement is self-evident because markets go up and down, economies move through different cycles, and a wide variety of factors changes investment outcomes.

If there is any rule in investment that needs to be religiously adhered to, it is “Diversify your investments”. Basically, diversification is a technique that reduces risk by allocating investments among various financial instruments, markets and other categories. So, how should you diversify your portfolio.

Portfolio diversification comes in many ways. One of them is diversifying across asset classes, moving beyond stocks and bonds, the traditional financial assets, to investing in alternative types such as real estate, derivatives private equity.

Diversification across different markets. Most investors have a bias towards instruments issued in their home country. But it is always beneficial to look beyond your local markets because shocks in one market may not affect the other.

Diversification using unit trusts. Unit trusts are one of the easiest ways to achieve diversification as well as asset allocation without in depth knowledge of each asset class.

Diversification sounds like a truly viable option that every investment club should take advantage of? So, why are so many investment clubs not using diversification? Probably the only explanation is that they don’t understand the benefits. Here are some of the benefits of diversification.

A diversified portfolio minimizes the overall risk associated with the portfolio. Since investment is made across different asset classes and sectors, the overall impact of market volatility comes down. Owning investments across different funds ensures that industry-specific and enterprise-specific risks are low. Thus, it reduces risks and generates higher returns in the long run.

When your holdings are widely diversified, you can spread them out over widely divergent forms of assets, including stocks, bonds and real estate. Each of these assets exhibits different strengths and weakness in terms of risk and profitability. By investment clubs maintaining holdings in all of these areas it helps to create a stable portfolio that will increase in value over the long term.

Diversified portfolios offer better risk adjusted returns, when two portfolios yield the same returns, a diversified one will take lesser risk than a concentrated one. Hence, for better risk adjusted returns, its vital for clubs to have a diversified portfolio across asset classes.

Diversification is a practical approach that every investment club should take advantage of. It allows investors to shuffle their investments and take advantage of the market movement. It lets investors spread their investment across different asset classes and increase annual returns.

Not every investment club is ready to play a risky game. Investment clubs that have just started investing prefer stability in their portfolio and diversification ensures the protection of their savings hence capital preservation.
Because assets perform differently in different economic times, diversification smoothens your returns. For example, while stocks might be underperforming, bonds and real estate may keep steadily growing.

Diversification combined with asset allocation helps you set and achieve your club’s financial goals. You base your asset allocation within your diversified portfolio on the length of time you need to realize a financial goal and your ability to tolerate risk.

Diversifying your stock portfolio is important because it keeps any part of your investment assets from being too heavily weighted towards one industry or sector.

Finally, diversification is a long-term strategy, and it should be treated as such. The common mistake that investors make is abandoning the strategy rather than sticking with it. Although having a diversified portfolio won’t eliminate all the risk, a well thought out diversification strategy can reduce risk.

There is no magical formula to building and preserving wealth rather, it requires patience, discipline and a sound portfolio strategy.

Hassan Kitenda CAIA, is an equity and fixed income research analyst.
Email; hkitenda@outlook.com.
Twitter; @kitendaahassan


Do you have a story in your community or an opinion to share with us: Email us at editorial@watchdoguganda.com
Share1Tweet1SendShare

Related Posts

Museveni has tasked Presidency Minister to remove RDCs who are not adding value to government.
Community News

Budiope West 2026; Milly Babalanda’s Transformative Bid Redefines the Race

17th July 2025 at 00:14
Phillip R. Ongadia
Op-Ed

PHILLIP R. ONGADIA: NRM primaries: A necessary evil to test the depth of the river

15th July 2025 at 14:57
Rogers Wadada
Op-Ed

WADADA ROGERS: Telecom operators in Uganda should stop re-assigning customer’s phone numbers

15th July 2025 at 10:17
Next Post
The late John Kittobe

John Kittobe: How Uganda lost a retired peaceful citizen through riots

  • Prostitution in Uganda- Courtesy Photo

    10 dangerous hotspots known for prostitutes in Kampala

    1140 shares
    Share 456 Tweet 285
  • Silent Billionaire Bosco Muwonge Buys Mukwano Arcade at UGX 250 Billion Cash Down

    58 shares
    Share 23 Tweet 15
  • Who is Bosco Muwonge, Uganda’s elusive real estate billionaire?

    42 shares
    Share 17 Tweet 11
  • LIST: New salary structure for civil servants starting July 2020 out; scientists, lecturers get juicy pay rise

    2292 shares
    Share 917 Tweet 573
  • LIST : Gov’t releases Revised Salary Structure for Teachers, Police, and Prisons Staff for FY 2024/2025

    128 shares
    Share 51 Tweet 32
Facebook Twitter

Contact Information

Watchdog Uganda is a portal for solution journalism, trending news plus cutting edge commentaries in the fields of politics, security, business, tourism, entertainment, technology, agriculture, climate change, environment, public health et al. We also give preference to Ugandan community news and topical discussions. The portal also publishes community news and topical discussions.

Email: editorial@watchdoguganda.com
To Advertise:Click here

Latest News

Leaders of the Opposition Political Parties

JOSHUA MUZIRA: Mushrooming political parties in Uganda 

16th July 2025 at 17:25
Mashable is a global, multi-platform media and entertainment company For more queries and news contact us on this Email: info@mashablepartners.com

Check out

  • Trending
  • Comments
  • Latest
Minister Muruli Mukasa

LIST: New salary structure for civil servants starting July 2020 out; scientists, lecturers get juicy pay rise

24th May 2020 at 10:45
Pregnant woman

Shock as 17-year old boy impregnates his two sisters during Covid-19 lockdown 

17th June 2020 at 08:17
Sudhir Ruparelia is the undisputed king of Kampala

Billionaire Sudhir’s wisdom on how to invest in real estate

0

How a boy’s destiny turned from cotton grower to communications guru

0
Leaders of the Opposition Political Parties

JOSHUA MUZIRA: Mushrooming political parties in Uganda 

16th July 2025 at 17:25

Huawei Technologies Uganda 2025 Campus Recruitment Program Aims to Capacitate Aspiring Professionals  

16th July 2025 at 15:20

© 2025 Watchdog Uganda

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In
No Result
View All Result
  • Home
  • News
    • National
    • Politics
    • World News
    • Media Outreach Newswire
    • Africa News
    • Tourism
    • Community News
    • Luganda
    • Sports
      • Football
      • Motorsport
  • Op-Ed
    • #Out2Lunch
    • Conversations with
    • Politics
    • Relationships
  • Business
    • Agriculture
    • CEOs & Entrepreneurs,
    • Companies
    • Finance
    • Products
    • RealEstate
    • Technology
  • Entertainment
    • Lifestyle
  • People
    • Showbiz
      • Salon Mag
  • Special Report
    • Education
    • Voices
  • Reviews
    • Products
    • Events
    • Hotels
    • Restaurants
    • Places
  • WD-TV
  • Donate
  • China News

© 2025 Watchdog Uganda