Investment: don’t put all your eggs in one basket

This may be a frequently used cliché but it holds very true when it comes to investing.

If you are involved in the property and construction industry it could be that you are 100% focused on this sector, not only in terms of your business, but also your investments.

But diversification can be important.

Imagine you have a successful construction business which has enabled you to invest in property and also your pension is reliant on the property market. Essentially you are 100% reliant on the property and construction sector for your income, wealth and pension.
Have you considered what the impact of a downturn in the sector might be to your investments?

One of the most effective ways of reducing your risk is to bring variety into your investments or diversify your investments.
A diversified portfolio has a mix of varied assets such as equities (shares in companies), government and corporate bonds (loans to governments or companies), property and cash. Even within these asset classes, investments can be further diversified based on sectors, geographies, and other factors.

The values of different assets can move independently and often for different reasons.

Shares for example move in line with the performance and prospects of companies; bonds are most prominently influenced by interest rates; as are property values, which are closely connected to the performance of the domestic economy.

Getting the right asset allocation, which is not wholly property focussed, could make you a healthy return, whilst protecting you against any downturn in the sector.

Achieving your long-term goals requires balancing risk and reward. Choosing the right mix of investments and then periodically rebalancing and monitoring your choices can make a big difference in your outcome.

Diversification does not guarantee returns or eliminate risk. It doesn’t ensure high gains or prevent loss of investments. But, it casts a safety net which reduces your investment risks to a degree and enables you to limit your losses by optimising your returns.

If you need any help or advice our Wealth Management team offer a holistic approach to financial planning with the aim of structuring your affairs to ensure that you successfully meet your financial objectives.

We advise on a wide range of financial matters and tailor our advice and service to your own unique personal or corporate needs.
For more information contact Stuart Stead at Cowgills on 01204 414 243 or stuart.stead@cowgills.co.uk