Why investment eggs go in different baskets
Diversification is an often-used investment strategy which aims to guard against some of the risks widely associated with economic fluctuations and stock market peaks and troughs.When it comes to investing, it’s good to hedge your bets and spread your money around different types of asset so that a poorly-performing investment doesn’t greatly damage your returns.
Financial advisers often recommend that portfolios should be diversified to include a range of assets alongside shares, such as bonds, property, and cash, so that the risk is effectively spread over a range of different companies, markets and economies,giving your money the best opportunity for growth.
Each of these types of assets has different characteristics and their performance will vary from year to year. The combination of these assets that will be right for your circumstances is likely to alter over time, as will your appetite for risk.
During your younger years, you may want to invest in assets with a higher potential for growth, but greater risk, because you have the time to benefit from their long-term growth. As you get closer to retirement, your appetite for risk may well change, and you may want to choose more conservative investments that are steadier in both risk and return.
The choice of potential investments is vast. The difficulty comes with choosing the right spread of investments to meet your investment needs. Your financial adviser will be able to review your financial goals and help you choose the right mix to match your circumstances.
It is important to take professional advice before making any decision relating to your personal finances. Information within this blog is based on our current understanding of taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of,and reliefs from taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.
The value of investments 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. If you withdraw from an investment in the early years, you may not get back the full amount you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency.