The common piece of advice that all investors can agree on is the need to have a diversified portfolio. This basically means that an investor should not invest all his money in one field, one company or one form of investment. Investing exclusively in high risk stocks may seem like the best way to get rich quick but it is really setting an investor up for failure and loss of capital. Likewise, if an investor puts everything they have into low risk bonds, they will not build a very large nest egg. Investing in health insurance companies, high tech stocks and safe bonds to create a variety of investments is how to grow a diversified portfolio.
Stocks, bonds and mutual funds are the more popular investment vehicles for the novice investor. However, investing in health insurance companies is not as well-known but it can be an interesting addition to any portfolio. These companies have two goals. They need to make money from premiums on the policies they sell and they need to invest that money wisely in order to insure that there is enough money to cover those policies should the need arise.
These type of companies employ tons of statistical people to analyze the risk involved with each policy and have, in fact, become very good at off-setting their losses. Unexpected natural events that effect masses of policy holders, however, can skew their results and, in turn, their bottom line. When this occurs, it can be damaging to an investor’s portfolio if it is not diversified. If it is spread out well between many types of investments, then the damage will be nothing more than a slight hiccup because investing in health insurance companies is just a small portion of the total money invested.
On the other hand, for those considering investing in these companies, these catastrophic events are a great time to get a foot in the door. The value of the company’s stock has gone down due to massive payouts but future earnings are suddenly looking up. In fact, many people either buy new insurance policies or upgrade their existing ones after a natural disaster, which is great news for investors. Health insurance companies can be an asset to any portfolio. In fact, wise and seasoned investors know that due diligence, careful analysis and diversification will all help to create a portfolio that can weather any storm and continue to grow and multiple.