Diversifying your portfolio
Putting your money into different types of investments is called ‘diversification’. As you build your portfolio, it can help you reduce the overall risk of losing money.
As a simple example, if you invest in shares, you can diversify by putting your money into a range of companies. If shares in one company don’t perform well, others in your portfolio may fare better, helping you to reduce the impact in the value of your whole portfolio. Of course it will also tend to limit the potential for gains in your portfolio as significant gains in one or many investments will be reduced by those that have not performed as well or have fallen. Diversification is a mechanism that should act to reduce the fluctuations (or “volatility”) in value, both upward and downward movements.
You can also diversify by spreading your money across different types of investments – asset classes – like shares, cash and fixed income securities, such as bonds and gilts. Having a portfolio diversified across different assets classes may create a less risky investment experience than if you were to invest in just a single asset class.
One way to easily increase diversification is through funds. When you invest in a single fund, your money is actually spread across a wide range of investments. Funds can invest in single or multiple asset classes. Find out more about funds
Multi asset funds
To take this diversification a stage further you should consider multi asset funds which invest in other funds or in a mix of shares, bonds and cash. It’s an alternative to manually choosing lots of funds from different sectors, markets, and countries. In a multi asset fund the fund manager would invest in a wide range of assets, industries and countries on your behalf.
Multi asset funds can be particularly useful for first time investors or if you’re still quite new to investing. That said, it’s a good way to build a diversified portfolio quickly even if you’re experienced and aiming to get the best potential for growth and invest in a fund with a different mix of shares, bonds and cash.
Keep in mind that even if you diversify your investments, you can still lose money as their value can fall as well as rise.
How to invest in multi asset funds
The minimum investment is just £50 when purchasing funds from our funds market.
It’s easy to find multi asset funds using our fund search and filtering by ‘sector’ to choose one of the following options:
- IA Mixed Investment 0% - 35% Shrs
- IA Mixed Investment 20% - 60% Shrs
- IA Mixed Investment 40% - 85% Shrs
From the results you can view the fund factsheets for more information on which assets make up the fund holdings.
Multi Manager funds
As multi asset funds give you the benefit of investing in several asset classes by purchasing just one fund, so a Multi Manager fund gives you the benefit of being invested in funds from different managers through buying just one fund. The manager of a Multi Manager fund will look for the best performing fund managers across a number of sectors. This gives you an easy and simple way to get diversified exposure across a range of asset classes while simultaneously benefitting from the expertise of world’s leading investment managers.
Each Multi Manager fund will have a different investment objective and the mix of assets is adjusted to suit different levels of return and appetite for risk. Investors with a longer investment horizon may be willing to take more risk, while those with shorter term goals may prefer to take less risk. It’s important to remember that investing does carry risks. The value of investments can fall at any time as well as rise and you might get back less money than you invested. If you’re unsure about any aspect of investing, you should seek advice from a financial adviser.
Find out more about building a multi-manager portfolio in our Stockbrokers TV video with Jaime Arguello, Head of Barclays MultiManager funds.