SPREADING THE RISK - DIVERSIFICATION
SMART PEOPLE MAKE SMART PLANS.
Examples of different asset classes are shown below (graphic not to scale):
Hedge funds are an asset that can provide returns uncorrelated to both bonds and equities. Many hedge funds are designed to capture market increases while at the same time offering protection against capital loss. These are sometimes known as Alternative Investments.
Commodity investments are useful in creating a diversified portfolio, and these are sometimes known as Alternative Investments
Investment in equities, both UK and global, has long been the cornerstone of most investment portfolios, providing long-term scope for growth of both capital and dividend income. Equity performance tends, however, to be volatile in the short term.
Cash is often perceived as a risk-free investment but it is also a low-return investment. Historically, cash has given a return of close to zero once the impact of inflation is taken into account
Property is an asset class that has re-established its importance in the 21st century. It offers the potential for long-term income and capital growth and is normally uncorrelated to equity markets.
Fixed interest securities (bonds)
There is a wide range of fixed interest securities from low risk short-term government bonds to high-risk long-term corporate bonds and high yield bonds. All these Bond investments can be a useful counter-balance for equities because the performance of these two asset classes tends to have a low correlation, i.e. they do not normally move in parallel
Spreading risk is one of the most important principles of investing, not only between several different investment types (also known as asset classes) but also between different companies.
By taking this approach, even if a particular asset class or company goes through a bad patch, the rest of your investment need not be affected. Deciding which asset classes to invest in to match the return you are looking for links to your chosen risk profile.
The value of the investment and the income they produce can go down as well as up and you may not get back as much as you put in.
Ablestoke Financial Planning LLP’s Registration Number is OC367708 and place of registration is England. The Company Registered Office is Admirals Offices, Main Gate Road, The Historic Dockyard, Chatham, Kent, ME4 4TZ. Ablestoke Financial Planning LLP is an appointed representative of Intrinsic Financial Planning Limited and Intrinsic Mortgage Planning Limited, which is authorised and regulated by the Financial Conduct Authority. Intrinsic Financial Planning Limited and Intrinsic Mortgage Planning Limited are entered on the FCA Register under reference 440703 and 440718. The term partner is used to refer to a member of Ablestoke Financial Planning LLP.
The value of investments and pensions and the income they produce can fall as well as rise. You may get back less than you invested.
Tax treatment varies according to individual circumstances and is subject to change.
Your home may be repossessed if you do not keep up repayments on your mortgage.