What is investment diversification?
Investment asset classes tend to follow trends, so if you have all your assets in the one asset class, then you are open to the market’s rises and falls for that class of assets. That’s why it can be a good idea to spread your investments to help smooth out the risks. You can diversify investments within an asset class, for example, by buying shares from different companies. You can also diversify investments across the asset classes, with a mixed assortment of shares, property, bonds and cash. When you have diversified investments, the value of your total investment portfolio won’t be as affected by a drop in value of one company’s share price when compared to having invested solely in that company. But remember not to spread your investments too thin – seek expert advice on the optimum way to diversify investments.
