What phrase sums up 2020 for you?

  • 8th December 2020

“These are uncertain times”

If there is a phrase that could sum up all that has happened in 2020, this would surely be it. And if there’s one thing the markets don’t like, its uncertainty.

When it comes to investing we know that a well-diversified portfolio helps to limit the impact caused by volatility and often allows for a much smoother investment journey.

So what do we mean by well-diversified? Put simply, it’s not having all of your eggs in one basket - different assets, doing different things in different places. If one asset class struggles then there are other assets that can still generate returns for the portfolio.

However, building a diversified portfolio is just the first step. Regular reviews are needed to ensure that the original holdings continue to perform well and that strongly-performing assets don’t unbalance the portfolio.

We see this ‘imbalance’ most often in two areas: self-made portfolios and employer share-save schemes.

Everyone loves investments that do well, but the temptation is to keep buying them simply because they are familiar and past performance has been good. But over time a single asset class or (even worse) a single share can represent a large portion of the total portfolio. It’s really interesting to see how many portfolios include a huge holding in Tesla right now, mainly because it is so popular with many ‘best buy’ funds.

A similar problem can occur with share-save schemes. Saving regularly is a great way to build up a nest egg, but after several years you can find yourself heavily invested in only your employer. This is the ultimate eggs-in-one-basket scenario and can result in some terrible outcomes – ask anyone who was in a bank’s share-save scheme in 2008…

How do you know that you are invested suitably? It’s difficult. Fund supermarkets rarely offer the sophisticated risk mapping or x-ray tools that advisers have and they don’t have a responsibility to ensure you are invested appropriately for your attitude to risk either. This is where an Independent Financial Adviser can really add value. We can review, rebuild and monitor portfolios to give you the best chance of meeting your investment goals and reducing the risk of nasty surprises.

Talk to us today to find out how we can help with your investment portfolio.

The information and opinions expressed herein are the views of Forrester Boyd Wealth Management and are based on current public information we believe to be reliable but we do not represent that they are accurate or complete and should not be relied upon as such. Any information herein is given in good faith, but is subject to change without notice. No liability is accepted whatsoever by Forrester Boyd Wealth Management, employees and associated companies for any direct or consequential loss arising from this document.

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Information contained within this article is not a personal recommendation of Forrester Boyd Wealth Management. The wording in this article is not to be construed as an offer or advice. We recommend you seek advice concerning suitability from your investment adviser.