Investment Diversification

Investment diversification- it’s another way of saying “Don’t put all your eggs into one basket”. If we could see into the future, there wouldn’t be any need for portfolio diversification. Hopefully one day! But for now, we have Investment diversification as a tool to lower risk, balance your investment portfolio and give some extra peace of mind.

 
From a practical viewpoint, diversifying your investments offers more balance to your portfolio. It’s a risk management strategy to spread your money across a range of assets that have been previously known to perform differently in the same circumstances.

The 4 main asset classes are:

• Cash
  • Bonds
  • Shares
  • Property
    
    

Each one carries its own advantages and disadvantages. Like most financial decisions there is no one way to invest, it is all dependent on your individual circumstances.

Risk Taker or Safe Player?

Where you are in your life or career will massively shape your attitude when it comes to investing. Under normal circumstances, diversifying your portfolio across different assets is an effective way to reduce risk. If you hold only one investment and it performs badly, you could lose all of your money. If you have a variety of different investments, it is very unlikely they will all perform badly at the same time and hopefully balance out one another.

What are the four main investment asset classes and the risks associated with them?

Cash

Cash, it is relatively secure but can lose value if the interest rate doesn’t keep up with inflation.

Bonds

These provide regular income. However, the main risk here is that the bond issuer cannot repay in full.

Shares

These provide regular income and an opportunity to grow over time. From a risk point of view, shares can go up and down and as a result so will your investment.

Property

This can provide stable and regular income and has the potential to grow over time. The downside is property prices can fall reducing the value of your investment and property transactions can take a long time, which means your money might be tied up longer than you want.

Talk to a financial adviser about investments, your goals and current situation to find an investment strategy that will suit you.

When investing in your future, remember It takes time to grow money. Making an investment can be daunting, especially if the market experiences volatility, which in the lifetime of investments it most certainly will. A lot of advisers will say give an investment at least ten years and during uncertainty, don’t lose sight of your financial goals. If you have concerns or worries about your investments, then don’t hesitate to get in touch. 

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.