How to diversify my portfolio?

 Are you wondering how to diversify your portfolio? it is a great question as it is key to minimize risk and volatility. 

However, building a well diversified asset portfolio is not evident. How to start? How to do it avoiding falling into pitfalls and costly mistakes?

Living in France, adds an additional context to be taken into account for foreigners and expats like us.  We are happy to share with you our knowledge and experience on this key topic… 

Table of Contents

What is asset portfolio?

Asset portfolio is the collection of financial instruments, assets or products grouped by common characteristics or type. 

Most of people will have as assets real estate, cash, and stocks but there could be as well bonds, crypto currencies, commodities (like gold), certificate of deposits, and even valuable objects like watches and paintings. 

Each asset type will represent a given % in a family total portfolio. For example, a portfolio could be composed by 50% in real estate, 30% in stocks, 20% in crypto.   

Importance of having a well diversified portfolio

We are all familiar with saying of ‘do not put all your eggs in the same basket’. It is all about that! 

A diversified portfolio will reduce volatility and risk. This is due to the fact that some assets are uncorrelated to each other. When stocks are down, normally the economy is going through recession, or geopolitical conflicts creating fear in the market. Investors then will turn their capital towards more secure assets like gold and bonds making a value increase on the later.  

In few words, investors owning multiple assets (stocks, gold, bonds…) will see less changes on their wealth balance when economic cycles happens. This creates as well opportunities to reallocate assets and take profit on those that are overvalue. For instance, If gold is reaching ATH (All Time High) value, maybe you can sell a bit to buy another asset type undervalued by the market at the same time. ‘Sell high, buy low’.  

Practical example of why diversifying your portfolio

Imagine you have been working and saving for several months. Now that you have accumulated an interesting amount of money (say 10 000€)  a friend recommends a new crypto that will ‘go to the moon’ in coming days. 

So you follow your friend ‘advice’ and invest all in this crypto. By bad chance, it drops -40% instead just few days after – which may happens in real life. Your total worth is now 6 000€. Let’s call this scenario A. 

What if you would have diversified your portfolio and invested half of your capital in one stock (which will go up 10%) and the other half in this crypto (Scenario B), then your outcome will not be as bad as for the first scenario (5000€ x 1.1 + 5000€ x 0,6 =   8500€). 


Scenario A

Scenario B

Asset allocation

100% crypto

50% Crypto, 50% Stock


-40 %

-40% Crypto, +10% stock

Initial investment

10000 €

10000 €

FInal outcome

6000 €

8500 €

 We can see that scenario B (with asset diversification) represents the best result for the investor. 

Nobody can predict the future, and a big part of our investment results are out of our control. Hence, a well diversified asset portfolio will reduce volatility and increase your chances of growing, or simply preserving, your wealth. 

Pitfalls to avoid when diversifying your portfolio

Not considering your risk tolerance

Some people will invest in a high-risk / volatile asset just because they heard from a friend or simply by ignorance. So if your risk tolerance is low, you will most likely panic and sell all at the very first value drop (with loses). You should invest in assets that feel comfortable with and will not keep you awake at night.   

Wrong investment sequence

Start first with your emergency fund (cash) and then other assets according to your risk tolerance and personal projects. 

For instance, if you want to invest for very long term and your risk tolerance is high, then maybe you can start investing in growth stocks, cryptocurrencies, private equity, and even real estate. In the other way, if you have a short term project or low risk tolerance, you may start investing in bonds, etc. 

Not diversifying enough 

Assets could positively correlate to each other. This means that if one asset goes up, the other will do the same, or vice versa. There are assets that will have a negative correlation, meaning that if one goes up, the other will go down. Typically, when bonds goes up, real estate goes down. So one can compensate the other.

Besides asset type you may want to consider sectors (ex: technology, energy, consumer staples…), regions (ex: Europe, USA, China…), currencies (ex: Dollar, Euro…).   

Diversifying too much

Having more than 20 stock values in your portfolio, will be hard to track each company performance, and therefore you will struggle to sell or buy at right time. 

You may feel overwhelmed by following and analyzing too much information which could lead to mistakes or unnecessary stress.  This is not diversification but dispersion. So try to find the right balance and keep focus. 

How to diversify your portfolio based on your age?

From 25 to 40 years old

At this age, you may be going up in your company ladders or increasing your revenue. This is the perfect age to start saving and investing. The youngest, the best (thanks to the compounding interest effect).  

As said before, the ’emergency fund’ would be the 1st thing to invest in. It should be liquid, low risk and the equivalent of 3 to 6 months of expenses (saving account like ‘Livret A‘). 

Secondly, you may want to consider investing in real estate (your own home or for renting) as you may not want to skip the ‘leverage effect’ and invest with your bank’s money . Finally, it is a good age to starting investing in the stock market (long term) through a PEA

From 40 to 55 years old

If you have not acquired yet your own home, you still have time to do it (even though buying may not be fitting everybody situation). Remember, the older you get, the difficult to get a bank lending you money. 

Secondly, opening a PER to optimize your taxes could be a good idea. Then you can open as well an ‘Assurance Vie‘ thinking on taxes and wealth transmission to your family.

 Finally, having some apartments rented or SCPI could be a good way to diversify even further depending on the market conditions. Read our article about buying rental real estate in France.  


More than 55 years old

You should start planning carefully your transition to retirement and secure complementary revenue (PER, SCPI, Assurance vie, PEA). You should secure that your family is well protected in case you are not there anymore. It includes donating capital to your kids and well managing the ‘Assurance Vie’ beneficiaries. 

Here an article with more details about investing while living in France to explore more options and details. 


Diversified portfolio profiles

Here some examples we have taken from books (‘Les Meilleurs Placements, Marc Fiorentino) and specialized magazines (‘Investir‘) and their recommendation of asset diversification based on your individual profile: 

No risk! 80% bonds (so called ‘fonds euros’ for example), and 20% in cash (Saving accounts like Livret A, PEL, …) 

Ok for a little bit of risk: 60% bonds, 20% real estate (Direct or SCPI), 10% Cash, 10% stocks (individual, ETFs, Fonds..)

Balanced profile: 35% real estate, 30% bonds, 25% stock, 10% cash

I am comfortable with some risk (dynamic profile): 40% stocks, 30% Real estate, 15% Bonds, 10% others (crypto, watches, etc…), 5% cash. 

Let’s rock & roll! (high risk, offensive profile): 55% stocks, 25% real estate, 15% others (crypto..), 5% cash 

This is an example of a detailed recommendation by ‘Investir’ magazine (dated early 2023): 

25% Real estate, 20% Stocks (PEA, classic trading accounts), 10% Cash, 10% PER, 8% ‘Assurance Vie / bonds, 12% ‘Assurance Vie’ stocks, 8% SCPI, 5% gold, 2% others (bitcoin, crowdfunding, private equity)

How to track your portfolio diversification?

You can use a simple tool like a spreadsheet in MS excel, specially if you are starting investing and have few assets to track. 

In the other hand, if you are already in an stage where you have multiple assets and accounts to track, you may want to subscribe to an specialized tool so you can focus your time on the added value activities (like arbitrating and making decisions on your money) instead of messing around with macros and excel. 

myFrenchMoney tip!

We personally use 'Finary' (french start up). It is super easy to connect your accounts (even international), cool analytics, web / mobile version, available in English and compliant with local regulations and cybersecurity standards. Click on the start above to benefit from our referral link.

Sharing our own experience about our portfolio diversification

We started our portfolio like most of young employees in France: cash in a Livret A and some stocks through our company PEE (even though we did not understand all details).  

Five years later, we acquired our own home. It was a good move as real estate market was still accessible during that period and we have stayed in this place for more than 8 years (long enough to get the pay back). 

Once we have recovered from the down payment of the apartment, then we opened a PEA and started buying some ‘high fees’ funds proposed by my bank.  We still have this PEA but with low fee ETFs instead. 

Few years ago, we’ve invested in an apartment for rental through ‘Loi Pinel’ (to optimize taxes),  and  to spice up our portfolio we have  invested a limited % of our portfolio in crowdfunding, cryptos and private equity. 

As we are getting less and less younger ;), now we are thinking about our PER and ‘Assurance Vie‘ to secure wealth transmission. 

Our regrets? Not having started earlier in the stock market, bitcoin and maybe a rental apartment ‘mueblée or LMNP’, instead of our ‘Loi Pinel’ apartment.  

Final thoughts

Building a well diversified  asset portfolio, aligned with your risk tolerance and objectives, is key to make your capital growth without losing your ‘peace of mind’, but it is not an easy task. It is time consuming, and requires certain financial knowledge and even more important, passion for your personal finance. 

In addition, you do not build a portfolio and forget about it. You would need to review it periodically (twice a year) and make arbitration if your assumptions were wrong or changes happened in your personal situation (divorce, kids, change country, lost your job). 

For most of us, it would be better to get professional assistance from an independent financial advisor, and not your bank or somebody, that will just care to sell their own products and not your interests. 

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Bon chance!  


Please remember that we are neither financial nor tax advisors. We are just sharing our best understanding based in our own experience. This blog is for educational purposes only. Do not make investment decisions solely based on what you read in this blog. What works for us, may not for you. Do your own research and look for professional service if required. Read our full disclaimer in the ‘about’ page.

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