Diversified investment portfolios – don’t put all your eggs in one basket!
“Creating a balanced portfolio of different investments will help to minimise risk. It’s about spreading your money around and not putting all your eggs in one basket” according to Gavin Smart, Independent Financial Adviser at Forrester Boyd Wealth Management Ltd.
All investments come with a risk, and throughout our lives, our attitude to risk changes.
In your younger years with no commitments, you may have a high attitude to risk, whereas once you get married, have children, buy a house, your attitude to risk can become much more moderate. Any investment portfolio needs to be focused on your specific objectives and want out of your investments.
Spreading your investments over different products, sectors and even countries can help to shelter some of your assets. You may also want to consider how easy it is to access your money if you need to. You can never predict the future and you may want to ensure that if something happened and you needed to access some of your funds earlier than anticipated, you had the flexibility to do this.
The higher the risk, the higher the potential return. It goes without saying really doesn’t it. Shares may fall, companies that you hold shares in may fail, even countries can run into financial hardship causing any investments to suffer. Property can also be subject to fluctuations in value, especially in cities such as London where the impact on property prices can be much more volatile than other areas in the UK.
There are no guarantees when it comes to investing, so by creating a diversified portfolio, you are building something that aims to compensate for every eventuality. Investing is not a short term option, so by planning your investment strategy and timeline, you can ensure that your investments stand the best chance of balancing out any short term fluctuations in market performance.
Some funds will carry greater risks in return for higher potential rewards. Investment in smaller company funds can involve greater risk than is normally associated with funds invested in larger, more established companies. Above average price movements can be expected and the value of these funds may change suddenly.
The value of investments and income from them can go down. You may not get back the original amount invested.
Forrester Boyd Wealth Management is regulated by the Financial Conduct Authority.