If you want to diversify your portfolio of Costa Rica investments fully, you will need approximately 30 unique stocks. By doing it this way, the risk associated with one particular stock is virtually eliminated. As a result, you face the risk that is inherent to the overall market as opposed to the risk for one specific stock in your portfolio. However, there are additional opportunities to strengthen your investment portfolio further. For example, it is important that you diversify according to the actual type of stocks, whether small or large cap, foreign or domestic, etc. While these two options for diversification of your Costa Rica investment portfolio are extremely beneficial, you can take things even further by diversifying based on the type of investment, such as real estate, in addition to stocks and bonds.
Principles of Diversification
There is equal importance when talking about the principles of diversification pertaining to the way that real assets apply. In other words, you want to diversify your portfolio as to the types of real estate. You need to break things down by residential and commercial properties, foreign and domestic, and so on. To eliminate risk, it makes perfect sense for you to consider foreign real estate as part of your fully diversified investment portfolio for Costa Rica. In fact, including this South American country is one of the wisest decisions you can make. Remember, there are numerous types of risk associated with any investment, including monetary risk, such as inflation, political risk, country risk, and more. Although it might seem safe to put all of your investments in one basket, even those from the United States that appear to be risk-free, this is a very dangerous practice. This is evident when looking back at the housing crisis of 2008. During this current period of presidential candidates vying for position in the White House, it is easy to say that there is a tremendous amount of risk pertaining to the U.S. political environment. However, there is yet another type of risk that has become a real concern: climate change. In Alaska, glaciers are melting quickly; temperatures in the Southwest are soaring higher than ever before; there is a greater number of tornadoes; hurricanes are getting stronger; and floods in Texas have ravished homes, people, and livestock. The fact is, developing property near the high tide mark could easily result in coastal investments being swallowed up by water. For investments in Costa Rica, you want to make comparisons to each of these types of risk. After all, South America is not protected from all risks in that Costa Rica does have its own fiscal and political struggles. In fact, this country even faces the risk of climate change. However, when compared to shore developments in the United States, Costa Rica is less susceptible to risk. For one thing, building on the shoreline in Costa Rica is typically prohibited. The majority of properties are far enough away and high enough to be insulated from potential damage caused from rising ocean levels. As for the economy, Costa Rica is relatively stable; in fact, the economy is growing. For a long time, the Costa Rica government has made social spending more of a priority than military, which is actually nonexistent. Because there is no military presence, you may see this as a viable risk, but with this country having a strong ally with the United States, there is little chance that any neighbors would take an aggressive approach. Especially when looking at a region with a government that consisted of detractors, Costa Rica offers an excellent example of democracy. In this country, it is common for transitions to be seamless. You will also find the laws of the country to be fair and friendly when it comes to foreign investors. With just a few exceptions, it is possible for foreign investors to have fee-simple titles to real estate that come with all of the same legal rights given to citizens of the country. Today, the beautiful island of Costa Rica is a magnet for tourists. Because of the many opportunities provided by the island, there is an influx of foreign investors. Costa Rica is one of the most beautiful places in the entire world. For the diversification of your investment portfolio for this country, consider the tips provided so that you can enjoy a wonderful experience.