As I talked earlier this week, I advocate a great level of diversification, and that you don’t put all your eggs in the same basket. Whether you choose safe investments with banks, like Heritage Term Deposits, or riskier vehicles like the stock market or my coconut investment, or even try to make a little extra playing online slots (click here to give it a try!), you should spread your savings and investments around. You may think your savings are safe in your bank account, but some banks have gone bankrupt in the past. If it happens, the government has a guarantee in most countries, to protect your savings. However, there is a ceiling in the amount you can claim. In the UK, this amount is £85,000 per individual and per financial institution. If you hold more than this with one bank or banking group, you will only be refunded £85,000 if the bank fails you.
How to diversify your savings
Invest in several institutions. With the financial world always merging and regrouping, it is hard to know which bank belongs to which, but do a little homework and open bank accounts with several banking groups to protect your savings.
Invest in different types of accounts. An instant savings account is great for short term savings goals like car repairs, holidays or occasional treats. If you are saving for retirement, a house deposit, etc. you should look into fixed term savings to lock in your money at a better rate. The risk is that is you need the money before the term, there are usually withdrawal penalties.
How to diversify your investments
Find alternative investments. Apart from the stock market, there is a myriad of investments out there that you can try.
Real estate. I really like this one because you can leverage your money while getting return on the full amount of the property. If you research properly before investing, you can get great returns.
Farmland. Another favorite of mine, since I own cattle and a coconut farm. People will always need to eat and the population is growing, so farmland can be great, especially in places where labor and the cost of land is cheap. In Europe or the US it can be more complicated to yield good returns.
Online investments. Starting a website costs about $100, a bit more if you want to provide online payments or have a good designer create a site for you. There are lots of ways to make money online, selling products, ads, and so on. Returns can be great for the money invested, and in the case of niche site, the investment doesn’t require much maintenance.
Invest in a business. You can invest in any local business or start your own. Most businesses fail during their first year but if you are looking for alternative ways to invest and know where you put your money, it can be a fun adventure. I own an energy saving company in Spain that costs very little to maintain so we can afford to keep it open even though business is irregular.
What other ways of diversifying your savings/investments do you use? Any luck so far?