Diversifying Your Investments

Spreading your money amongst different investments is sensible, as putting all your eggs in one basket increases risk.  There are different types of diversification to consider:

Spreading across different companies and industries

The movement in the share price of individual companies varies significantly.  If you spread your investments across many different companies, you should not be greatly affected if one particular company performs badly. Also, companies in different industries can produce widely different returns.  For example, in certain economic climates, manufacturing companies may be less profitable while computer software companies may be extremely profitable.

All the funds we offer for DC pensions and AVCs are what are known as "pooled funds".  Contributions from members of different schemes are pooled together and invested as a whole. Risk is spread by investing in a wide range and a large number of companies.

Spreading between different markets around the world

Instead of just owning shares and other investments in UK companies, many investors also hold investments in overseas companies.  Countries around the world have different economic cycles, one may be relatively weak whilst another's is expanding. Risk is spread by investing in a wide range and a large number of companies.  Therefore, by spreading your investments across many different areas, you are hedging your bets and reducing risk by not exposing yourself to just one economy.

We offer funds which invest in companies of a single country and those that invest in a number of different countries.

Spreading between different types of investment

Rather than just invest in one type of asset (eg equities, bonds, cash or property), you might choose to invest in a mixture of them.  Again, diversification can lead to a more conservative strategy and lower risk.