Diversification. What is it and how does it help prevent losses?

Why diversify?

Every investment carries with it a certain risk of loss. Therefore, it is advisable to invest your savings in smaller amounts in multiple assets, financial instruments or, in the case of Investown, in different projects. Why? Different types of investments do not always behave the same.

In the same period, some may grow and others fall. It depends on many factors, including currency or geography. By spreading your funds across a variety of assets and financial instruments, you protect your entire portfolio. If, over time, one type of investment fails, the others stay with you and continue to earn.

“Spread your money into multiple assets or projects. If one of them fails, then you lose only a small part of the investment. Others will stay with you and continue to earn. “

How to diversify a portfolio in general

So which assets should you invest in? The choice today is very wide — cryptocurrencies, gold, silver, ETF, DIP, loans backed by real estate, savings accounts, term deposits, etc. If you're new to investing, or don't have the time to keep track of daily statistics, this list must have caught your mind.

But the specific choice of investment assets is always up to you and your preferences. Are you tempted by a high yield and are you willing to take a higher risk? Or, on the contrary, do you go for sure and do not mind a lower and stable yield? Assemble your portfolio so that the individual components complement each other. If you prefer to be tempted by a high yield, remember that it often goes hand in hand with higher volatility. Of course, that brings with it a higher risk. All of this also applies in reverse.

Therefore, it is important that the so-called “they bet on different cards”, and carefully their split the funds into several different assets.

How to Diversify on Investown

We recommend that you keep only a portion of your investment portfolio on Investown at all times. Approach Investown as a financial product that can be a stable part of your entire portfolio.

Diversification is also important within Investown. We explain how we divide projects into stages and tranches and how to set up a portfolio appropriately.

The project — the investment project has its owner, the intention and the loan framework — the total amount that the project owner borrows.

Tranches — we can further divide the project into tranches, these are sub-loans within the entire credit framework. The project owner has the opportunity to withdraw funds gradually according to the progress of development. Let us show this with a concrete example: Project P aims to purchase land and then build on the mentioned land. In the first tranche, he collects money to buy land. In the second tranche, it will select funds to secure building permits, project documentation and networking. The third tranche is used for the construction itself. And in the end, the last tranche will provide finance for finishing works.

Stage — We can still divide the individual tranches into stages — basically we will divide the loan into smaller parts due to the speed of financing. You can see the designation of a specific stage right in the title of each project.

If you invest on Investown regularly, keep a close eye on whether you have already invested in another stage or tranche of the same project. Then it's not about diversifying, but basically investing extra money in the same project. You're helping fund just another phase.

What your investment might look like, including risk:

If you invest CZK 100,000 in just one project and it fails, you lose the entire amount, the loss will be 100%. But if you divide the same amount into 20 projects, even if one of them fails, the loss will only be around 5%. In addition, other projects may soon cover it with their income.

How You Should Rate Your Portfolio on Investown

It pays off in investing pursue long-term goals and not react impulsively to minor fluctuations in time. If any of the projects you have invested in goes into delinquency, or even into enforcement, keep a cool head. Always We do everything we can to get back all or at least part of your investment. — read, How we protect your investments.

Delay or even Enforcement is also a common part of bank financing loans. Within the project financing cycle, it is assumed that part of the projects will not go according to plan. Whether the human factor enters the process, partly foreseeable complications such as construction delays due to material shortages, high inflation or unexpected events such as natural disasters. Currently, we have only 4.61% of projects in recovery (October 2025).

Hint: He reads, what information you should knowbefore investing in a project on Investown.

Investments in loans secured by real estate have a low correlation with the current situation in the stock market and are not dependent on the volatility of cryptocurrencies — even if equity markets fall, projects on Investown can proceed as planned.

TIP: Watch your portfolio for the long term and as a whole. Diversify not only between different asset types, but also within Investown. It is the combination of multiple projects that will help you in the long term to achieve a balanced and stable portfolio that earns you money.

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(This article does not constitute investment advice and is for informational purposes only.)