It is often said, the three most important things to consider when investing are diversification, diversification, diversification.

Uncertainty has become a feature of the complex world we live in. In an increasingly globalised, interconnected world, a whole range of geopolitical events can have an economic impact on you as an individual.

As a result, making sure your investments deliver the future you and your family want has become more of a challenge.

It may be a truism, but the expression ‘don’t put all of your eggs in one basket’ is fundamental to a successful investment strategy, whatever your goals.

Many people are drawn to property as an investment. The expression ‘safe as houses’ rings slightly less true today,  especially to anyone who needed to sell property in the slump of the early 90’s or during the financial crisis of 2008.

Put simply, if you invest in a single type of asset, you are concentrating risk. Making sure you have exposure to multiple asset types is therefore essential to reduce risk in your portfolio while maximising your potential returns.

In a diversified portfolio, a range of different asset types are combined. Assets are deliberately selected whose performance tends to be affected by different factors which, as a result, tend to behave differently. This behaviour is called ‘uncorrelated’. Research has shown that a properly diversified portfolio consistently smooths peaks and troughs of individual asset classes and delivers the most consistent returns over time.

Your portfolio can be diversified in three main ways.

By Asset Classes – company shares [equities], government or corporate bonds, property or cash.

By Geography – in the USA, Europe, UK, Japan or emerging markets.

By Sectors – technology, energy, financials, etc.

Balancing risk and reward should be central to your investment strategy – diversification is the best way of positioning your portfolio to benefit from market gains while minimising your overall risk.

You financial broker will help you create a diverse portfolio based on you specific investment goals and arrange rebalancing the constituent parts over time to ensure it remains effectively diversified depending on the performance of individual assets.