When planning a solid investment strategy, you’ve probably heard the term ‘diversification’ (along with other investment speak). Diversification refers to the simple principle of spreading your risk across various assets i.e. follow a “don’t put all your eggs in one basket” approach. While strategic investing does involve taking risks to allow for strong returns, it also involves reducing risk where possible in order to achieve your financial goals. And this is where diversification comes in.
Moving away from individual stocks, diversification positions your portfolio to enjoy the returns of broad economic forces, rather than being at the mercy of risks such as holding too few securities, chasing returns alone, or speculating on given information.
Pointers for successful Investment diversification
1. Spread your investments across and within asset classes
Do this with the help of an experienced fund manager. At any given time, some of these assets may be doing well while others might be under-performing. Your fund manager will be consistently balancing and reviewing these performance levels in order to protect your investment and maximise your returns.
2. Review on a regular basis
Deciding on a portfolio mix and where to allocate what funds at what times is not a once-off task. It’s essential that you keep track of your asset allocation and review and rebalance your portfolio accordingly. Experts recommend rebalancing your asset mix if any part moves away from your target balance by 10%. Of course, all this depends on your individual situation and goals. Also, don’t forget about investment taxes – know what you’re due to pay or might be due to pay to avoid nasty surprises come tax season.
3. Work with an independent adviser in the know
While you can benefit from common sense investment advice, you should work with an experienced financial adviser who will treat you as an individual and your portfolio as unique. Successful diversification relies on an understanding of your investment goals, long-term financial plans, immediate financial commitments, and risk profile. Plus, working with a trusted expert can help you avoid that could negatively impact on your financial plan.
When it comes to a healthy wealth management plan, investing is a crucial part of ensuring a secure and prosperous financial future. Need help deciding how to invest your money? Speak to us! When you work with TRG, you will enjoy the support of a team of professional investment experts, focused on protecting and growing your wealth at every stage of your wealth journey, from insurance to investment management and all the financial concerns between.