We asked founders and CEOs to share their personal experience on how investment diversification has protected their wealth. From diversifying across industries to diversifying tech investments, here are seven different approaches to consider.
- Discovering Income Across Industries
- Protecting Wealth Across Sectors
- Lowering Risk Across Asset Classes
- Moving Beyond the 2008 Crisis
- Clearing the Tech Sector Downturn
- Overcoming a Tech Stock Plunge
- Spreading Tech Investments
Discovering Income Across Industries
As an entrepreneur and business strategist, diversification has been essential to building my own companies and advising clients. Early in my career, I focused on growing a single diagnostic imaging company. When the financial crisis hit, demand for elective healthcare services declined, and our revenue suffered.
To mitigate risk, I began investing in commercial real estate and other small businesses in unrelated industries. This created multiple income streams that offset downturns in any one sector. For example, profits from a successful SaaS startup acquisition funded new imaging equipment during the recession.
Today, my companies span healthcare, technology, real estate, and finance. By spreading investments across diverse, uncorrelated sectors, we’ve built a robust portfolio that generates strong returns regardless of market conditions. The key is balancing risk so no single event can significantly impact wealth or success. For small-business owners, diversification means exploring new products, services, or customer segments to tap into more stable revenue sources. With the right combination, you can weather any storm.
Victor Santoro
Founder & CEO, Profit Leap
Protecting Wealth Across Sectors
Diversification played a crucial role when Lansbox faced an industry-wide logistics slowdown. Instead of relying solely on our core services, I had diversified both business investments and personal assets into different sectors, including e-commerce and technology. While the logistics market took a hit, these other investments continued to perform well, helping cushion the financial impact.
Personally, the decision to spread risk across various industries kept my portfolio stable and allowed us to pivot Lansbox’s offerings to meet changing demands. Diversification proved invaluable in protecting both personal wealth and the company during turbulent times.
Echo Shao
Founder, Lansbox
Lowering Risk Across Asset Classes
During the economic downturn of 2008, the value of my company’s domestic investments took a significant hit. Fortunately, we had been diligent in diversifying our investment holdings, which included a mix of stocks, bonds, mutual funds, and international investments.
Despite the downward trend in local markets, we saw growth in our international holdings, specifically in Asia, which was then enjoying a strong growth phase. This cemented my belief in the protective power of investment diversification. It became a real-life lesson illustrating how spreading investments across various vehicles and markets can shield wealth during times of economic shake-up.
The strategy didn’t just mitigate our losses but also positioned us more securely for future growth as we came out of the recession. So, diversity in an investment portfolio is not just about pursuing growth—it’s also a fundamental element of risk management.
David Chen
Director of Finance, Srlon
Moving Beyond the 2008 Crisis
A personal experience that highlighted the importance of diversifying my investments was the 2008 financial crisis. Back then, I had a substantial portion of my portfolio in stocks and mutual funds, and diversification proved crucial in safeguarding my wealth.
As the stock market crashed and many companies went bankrupt, I saw a sharp decline in the value of my investments. However, because I had also diversified into other asset classes, such as bonds, real estate, and commodities, the overall impact on my portfolio was minimized.
While my stock investments suffered significant losses, my other diversified assets were able to offset these losses and prevent me from losing a large portion of my wealth. This experience taught me the importance of diversification not just in terms of different types of assets, but also in terms of geographical regions and industries.
Additionally, diversification has also helped me weather other market downturns and volatility over the years. By having a diversified portfolio, I have been able to protect my wealth and avoid making emotional decisions based on short-term market fluctuations.
Adam New
Principal Owner, The Cash Offer Company
Clearing the Tech Sector Downturn
During my tenure as a Portfolio Manager at the University of Portland Investment Association, diversification served as a critical safety net that preserved our $400,000 club’s stock portfolio. During a significant downturn, one which notably took a hit on the technology sector, our diversified portfolio showed its strength. We had smartly allocated funds into different sectors, varying from healthcare to logistics to consumer goods, that offset the significant losses that were happening in tech.
The losses in the tech sector made only a 20% impact, as opposed to a potential 60%, had all funds been invested solely in tech. This is a clear testament to how diversification can protect your wealth even in volatile times. Realistically, investing comes with risks, and it’s impossible to predict market movements with 100% accuracy, so diversification serves as a solid risk-management strategy.
Kunal Madan
Founder, Amarra
Overcoming a Tech Stock Plunge
Diversification is a topic that often comes up when discussing investment strategies. It involves spreading your money across different types of assets, such as stocks, bonds, real estate, and cash. The goal of diversification is to reduce risk by not having all of your eggs in one basket.
Personally, I have experienced the benefits of diversification in protecting my wealth. A few years ago, I had the majority of my investments in tech stocks. At the time, the market was doing well, and these stocks were performing exceptionally. However, as we all know, the stock market can be unpredictable.
One day, news broke out about a major security breach at a large tech company. This caused panic in the market, and tech stocks plummeted. As a result, my portfolio took a significant hit, and I realized the importance of diversification.
Luckily, I had also invested in other sectors, such as healthcare and consumer goods. While these stocks did experience some dips due to the overall market downturn, they were not nearly as affected as my tech stocks. This helped balance out my losses and minimize the impact on my overall portfolio.
Keith Sant
Founder & CEO, Kind House Buyers
Spreading Tech Investments
Absolutely, diversification has been crucial in my tech investments. I’ve learned the hard way that putting all my eggs in one basket can be risky, especially in the volatile world of IT startups. By spreading investments across different technologies and sectors, I’ve been able to balance out losses in one area with gains in another. For instance, when one of my game development projects hit a snag, my investments in project management software helped offset the temporary setback, demonstrating the importance of a diversified portfolio in the tech space.
Christian Marin
CEO, Freezenova