What exactly is diversification?
Diversification is investment speak for the old adage “don’t put all of your eggs in one basket.” While a well-diversified portfolio cannot offer downside protection, it can assist you in maximising long-term growth potential. Because the values of different types of assets do not necessarily behave or move in the same direction, diversifying your investments can help lower your risk.
Balance of risk and reward
The balance between risk and return should be prioritised, and diversity is essential.
Keep your downside safe.
When global events cause market volatility, a well-diversified portfolio can assist in mitigating your losses. When Russia’s invasion of Ukraine generated market instability, some markets were hit harder than others. If you had put the majority of your money in Europe, you would have faced significantly bigger potential losses than if you had spread your money across all regions.
As your investment goal approaches, you might want to consolidate your gains. Diversification allows you to do this by rebalancing, increasing the number of lower-risk assets you hold. This should help to avoid the value of your investments suddenly falling in value when you need to withdraw funds.
By- Agency Support Team