Learning how to diversify your investments

The world of investment is a big one, and it can often be both confusing and overwhelming to expand the types of investments you hold for this very reason. However, many financial advisers would argue that this is the single best way to spread risk and protect your portfolio. Therefore, it only makes sense to figure out how you could achieve this.

Asset InvestmentsWhat types of investments exist?

An independent financial adviser will be best placed to help you achieve a well diversified portfolio, but it helps to understand the different ways that this becomes possible.

The typical assets that are generally available include shares, bonds, cash and property. Diverse investments can be brought together using an investment platform; this is something that you and your financial adviser can look into collectively.

How can I diversify my portfolio?

There are a number of different ways to diversify your portfolio, from investment funds to considering assets and sectors. We’ve delved deeper into each of these topics below:

Consider investment funds

Investment funds could be ideal if you want lots of individual assets without the stress of keeping on top of them all. Funds are typically managed by a professional fund manager, with distinct descriptions of the types of assets in which they invest. For example, some funds could invest in UK shares, overseas commercial property or government bonds.

Consider your assets

A financial adviser is also likely to recommend that you diversify within assets. This might involve investing into different shares or bonds rather than simply having shares in a few large companies. One could invest in blue chip companies, another might invest in smaller growing companies, and another could have interests overseas. This way you can invest across hundreds of different assets without individually seeking them out. This way you have more eggs in more baskets, which could soften the blow if one of the companies experienced difficulties in the market.

Consider sectors

Just like you can vary between your stocks and shares, also consider which investments sectors you are investing in. You could just invest in telecommunication companies, but what if this sector sees a slump? For that reason, financial advisers often advise accessing investment funds that spread your investments across different sectors. The result of this is being able to access shares with high growth expectations without over-exposing your portfolio as a whole to undue risk.

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