Diversification in your savings

The importance of Diversification in your savings


Recent research suggests that many choose to do it themselves when it comes to one of the most important factors of their lives, their savings! DIY investors have long been aware of the investment risk and many decide they can diversify well enough to follow the age-old adage of ‘Don’t put all your eggs in one basket’.

While some will beat the market, many will not. This has been conclusively backed by research in the ‘Journal of Organisational Behaviour and Human Decision Process’ where they found amateur investors fail to diversify, to the point where they would be better off picking investments completely at random!

For example, consider this; each investment is a dice which is rolled for its end result, with 1-6 ranging from a bad to good return, and the individual payoff depending on each dice (investment).

The simplest diversification is to have a lot of dice (investments), meaning any losses may be counteracted by the other investments. As long as most investments manage a ‘4’, you may profit. The problem facing most DIY investors is, they may choose lots of investments, but all in the same sector and so diversification fails. If you are only invested in tech companies, if there is a tech crash, you will be hit hard. Having utility exposure for example might counteract some of this risk. The biggest question is how can you work out which investments will help you diversify?

In our opinion it takes a prohibitive amount of time and experience to sufficiently diversify and choose ‘good’ investments and so expert assistance is required.

What can we do for you?

Our professional team has been diversifying for our clients for 35 years. In that time, we have continued to weather events that might pull-down DIY investors. Our experience and in-depth knowledge of potential investments alongside our diverse strategies make us a great choice should you wish to invest for the potential for higher returns than current deposit rates. Not only this, but our contacts within the industry allow us to trade and be offered opportunities at far better rates and frequency than an individual. We offer our discretionary investment service at a competitive price. If interested please contact us to arrange a free initial meeting with one of our Chartered Financial Advisers.

Risk Warning

Investments in our Discretionary Managed Portfolio’s involve exposing your capital to market risk. At any point in time but especially in the short term, your investments will vary in value and may be worth less than the original amounts invested. To reduce risk, funds will be spread across a wide range of holdings including direct equity stock, Unit Trusts, Investment Trusts and fixed interest holdings, the distribution of which depends on the strategy. Investments may be made overseas as well as in the UK, exposing some of your capital to fluctuations in value between currencies which can also increase risk.