A Truly Diverse Portfolio – What it means for you

Do you have a truly diverse portfolio? What does that even mean? And why is it important?

Let’s look at this topic in more detail…

A diverse portfolio is about having your money in various places, rather than just invested in one area. Pensions, investments and so on.

Within each investment area, you need to share the money across a range of sectors and geographical regions – Europe, Asia, the US, for example. Funds investing in commercial property, ESG, oil and gas, bonds – the list is long.

Of course, part of this will come down to your attitude to risk – if you only want a very low risk investment your choice of funding areas will be more limited than someone who has a much higher risk profile.

Whatever your risk approach you still need to have your money in more than one area. No investment is guaranteed, and if the area you have invested in suddenly drops away, you can be faced with a huge loss.

This is also a reason to invest with the support of professionals. Trained funding experts will review your investment fund regularly and make suggestions to ensure any low performing areas don’t drag down your whole investment.

This approach to risk and investment needs to spread across your whole portfolio.

But it is also perfectly acceptable to take a different attitude for each investment area. You may want a low risk approach for your pension, but a higher risk for an investment bond for example.

You may wish to consider different geographic areas for the different parts of your portfolio – so APAC for investment, but the US/Europe for your pension, just as an illustration.

Remember that having a diverse portfolio is not just about money being tied up in pension and investments. You could have a savings account with emergency funds that are easily accessible. You will have your property – irrespective of whether you own it outright or have a mortgage. You may have buy to let properties too.

This mixed investment approach helps to give you peace of mind, knowing that if one area declines, it does not mean you have lost money.

You may also want to view this as balanced – so a more risk averse strategy in one area is counter balanced by a more ambitious approach in another area.

However, we would like to leave you with a note of caution…

Remember, until you remove money or completely cash out an investment area, you have not lost money. Your money is just not performing as well as it might have done previously. You only lose when you take it out, which is why it is essential that you see investment as a long-term approach, rather than a quick win.

Try to avoid keep changing funding profiles as it doesn’t give your money chance to settle, or time for the markets to recover.

Any news or global event can impact on finances – if nothing else the last two years has certainly taught us that. But invariably it balances out in time.

If you would like a review of your current investments, please contact us on 01344 875 310.

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