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All about Portfolio Diversification For Family Offices

No matter what approach is taken, the family office must manage risk by creating diversification within their portfolio that would not otherwise be offered by a third-party manager.

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The case for setting up family offices

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Investors often ask us questions about the risk of investing in an early-stage venture or funding it. If you decide to invest in anything, it is difficult to minimize risk. 

Wealthy individuals and family offices know that there is a relationship between higher risks and higher returns. Diversification can be used to balance the risk within a portfolio.

There are many ways to diversify your investment portfolio. Some investors try to do this on their own, but they are increasingly seeking the assistance of an independent professional advisor.

Diversification refers to the division of your portfolio among different assets. Diversification can help reduce risk because different investments may rise, plateau, or decrease independently. Diversified asset combinations can cancel each other's fluctuation in a well-structured portfolio of direct investments, thus reducing risk.

Family Offices have the ability to diversify within one asset category, such as manufacturing or medical technology. You could also acquire shares in companies located in different locations. 

You can also diversify your portfolio by buying interests in companies located in different locations (eCommerce or defense technology, for example). You can also diversify by investing in ventures that have a spread in the timing of the development curve.

Diversification is a good way to increase your chances of achieving better returns.