Is Investment Diversification the Right Strategy For You?

All you want is to get a decent return without too much worry, so what is diversification and how can it work for you?

Many professional investors are experts in their field. They can specialise in a market and make informed decisions quickly. They buy and sell their shares at exactly the right time, making plenty of money as they go.

Knowing the companies you deal with inside out is all very well if that’s your full time job. But let’s be honest, most of us aren’t in that position.

Is investment diversification the right strategy for you?

Most of us just want a nice little return on our investment to improve our life. We don’t need the hassle or the hours of research. For the most part, we just want to put our money in something safe and watch it grow.

The average investor doesn’t have anything like the level of information the professional does, never mind the time and inclination. Whilst they may have a bit of background information, they generally buy shares in companies they’ve heard of, companies that are doing things they understand, and whose value they hope will increase accordingly.

This of course leaves you open to risks. The company looks solid enough, but you don’t know the ins and outs of potential risks. So how can you protect yourself against losses?

Consider diversification

In investments, the old adage about putting all your eggs in one basket holds true. Don’t risk all your investment capital in one company, no matter how safe it seems or how long it’s been around. Remember Barings Bank? Over two hundred years of successful trading brought down in a flash after a trader made some foolish speculative investments. Nobody saw it coming; not even the experts.

Diversification is about spreading your money around. Splitting it into smaller investments over a variety of companies in different sectors. You may lose some of it if disaster occurs but you’re unlikely to lose everything, because if one company goes under its rivals will benefit. If one sector is struggling, others will be thriving.

In other words, diversification is a good way to reduce risk in your portfolio, and even out losses in difficult times.

Find out more about how investment diversification reduces risk.

Is investment diversification the right strategy for you?

Diversifying your portfolio could be the right strategy for you if…

  • You’re disinclined to take risks where they can be avoided
  • A loss could put you in a challenging financial situation
  • You’re new to investing and want to take a measured approach
  • You’ve already suffered losses and want to make safer investments
  • You’re unfamiliar with the companies or the industries you’re investing into
  • You want the thrill of market investment with reduced risk of losses

If any of these situations sounds familiar, you should consider diversification.

Our free guide explains all

At Expert Wealth Management we’ve been providing independent, personalised financial advice for more than ten years. Our strategy is to help you make the most from your investments and grow your nest egg as safely and reliably as possible.

We’ve used used this experience to put together a free guide that explains all about investment diversification. To find out if it’s right for you and how to effectively diversify your portfolio, click below.

I want to learn all about investment diversification

 

Jonathan

About the Author

Jon is a highly qualified and experienced Chartered Financial Planner and Certified Financial Planner with over 27 years’ experience. He loves working with clients who are passionate about getting the most out of life and feels his job is to support them living life to the fullest. Read more from Jonathan...
This article is distributed for educational purposes and should not be considered investment advice or an offer of any product for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed. Past performance is not indicative of future results and no representation is made that the stated results will be replicated.
In all of our various interactions with professionals offering advice, never have we felt as comfortable as we have since we started working with EWM. It is a great service that takes the anxiety out of looking after money which, later on in life, is a gift. RB & AB

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