“Diversification – spreading your money between different kinds of investments (called ‘asset classes’) and different kinds of investment product – helps reduce the risk of your overall investments (referred to as your ‘portfolio’) under-performing or losing money”.– The Money Advice Service.
Markets and global news can affect the performance of your investments in both positive and negative ways, having a well-diversified portfolio will help to smooth and balance turbulent times.
The recent financial markets have emphasised the importance of having a diverse investment approach within portfolios. A mix of geo-political risks ranging from Brexit and president Trump to belligerents like Russia and North Korea, show no signs of going away any time soon. Add to that the backdrop of rising interest rates and inflation.
We have all heard the saying “you shouldn’t put all your eggs in one basket”, diversifying your investments stops you from doing just that. Putting money in several different asset classes such as; cash, fixed interest securities, shares, property and alternative investments helps to mitigate the risk within a portfolio.
There is no single right way to diversify your portfolio. It will depend on the level of risk you are willing to take and your individual investing personality.
How financial advisers can help – Keeping track of lots of individual assets can be a daunting task. Financial advisers can help you build and maintain a diversified investment portfolio; these can be tailored to your individual needs and goals.
The value of investments and the income from them can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.
This article aims to supply general information but it is not intended to constitute advice. Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid any statement which may mislead. However, no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy. Always seek specific advice.