{"id":8234,"date":"2023-11-27T12:04:15","date_gmt":"2023-11-27T01:34:15","guid":{"rendered":"https:\/\/adelaideprivatewealth.com.au\/diversification\/"},"modified":"2023-11-27T12:04:15","modified_gmt":"2023-11-27T01:34:15","slug":"diversification","status":"publish","type":"post","link":"https:\/\/adelaideprivatewealth.com.au\/diversification\/","title":{"rendered":"Diversification"},"content":{"rendered":"<div>\n<p>Diversification is an investment strategy that lowers your portfolio\u2019s risk and helps you get more stable returns.<\/p>\n<p>You diversify by investing your money across different asset classes \u2014 such as shares, property, bonds and private equity. Then you diversify across the different options within each asset class. For example, if you buy shares, you buy across a range of different sectors such as financials, resources, healthcare and energy. You can also diversify by investing your money across different fund managers and product issuers.\u00a0<\/p>\n<p>Diversification lowers your portfolio\u2019s risk because different asset classes do well at different times. If one business or sector fails or performs badly, you won\u2019t lose all your money. Having a variety of investments with different risks will balance out the overall risk of a portfolio.\u00a0<\/p>\n<p>It\u2019s worth taking the time to review your investments and look for opportunities to diversify.<\/p>\n<p><img decoding=\"async\" loading=\"lazy\" alt=\"\" height=\"300\" src=\"https:\/\/mlcsocialfeed.p2.clientcommunity.com.au\/wp-content\/uploads\/2023\/11\/Diversification.png\" width=\"570\"><\/p>\n<h3>How diversification benefits you<\/h3>\n<p>Diversification is your best defence against a single investment failing or one asset class performing poorly (for example, the share market falling or one fund manager failing).<\/p>\n<p>If you diversify your investments, when some fall in value, others may rise and balance out the fall. Diversification lowers your portfolio risk because, no matter what the economy does, some investments are likely to benefit. For example, when interest rates fall, bond prices rise, while shares generally do poorly at this time.<\/p>\n<h3>How to diversify<\/h3>\n<p>To diversify well you need to invest across different asset classes and within different options in an asset class. You can also diversify by investing in different fund managers or product issuers.\u00a0<\/p>\n<p><strong>Review your investments<\/strong><\/p>\n<p>List all of your investments and what they\u2019re worth. This could include:<\/p>\n<ul>\n<li>\n<p>cash in a savings account<\/p>\n<\/li>\n<li>\n<p>shares<\/p>\n<\/li>\n<li>\n<p>managed funds<\/p>\n<\/li>\n<li>\n<p>an investment property<\/p>\n<\/li>\n<li>\n<p>your home<\/p>\n<\/li>\n<li>\n<p>your super<\/p>\n<\/li>\n<\/ul>\n<p>This will show you which asset classes you\u2019re investing in and where you could diversify.<\/p>\n<p><strong>Identify gaps and research other asset classes<\/strong><\/p>\n<p>If most of your money is in one or two asset classes, research other asset classes. For example, if you own a house, an investment property won\u2019t help you diversify. If property prices fall, you won\u2019t have any other investments to balance out the fall. To diversify, you could invest in different asset classes such as shares or bonds.<\/p>\n<p>Then within each asset class, make sure your money is invested across the different options available. For example, if you\u2019re mainly invested in one sector such as financials, you should research other sectors such as mining, materials, health care, capital goods and commercial and professional services.<\/p>\n<p>The way your super fund invests is a good example of diversification. Check your fund\u2019s website or annual statement to see how they invest.\u00a0<\/p>\n<p><strong>Invest overseas<\/strong><\/p>\n<p>Australia has a small share of the world\u2019s investment opportunities. Investing some of your money overseas will lower the risk of investing in a single market.\u00a0For example, investments in Asian and European markets may perform well when the Australian markets falls.<\/p>\n<p>If you invest overseas you\u2019ll be exposed to exchange rate risk.\u00a0<\/p>\n<p><strong>Invest through a managed fund, managed account, ETF or LIC<\/strong><\/p>\n<p>A simple way to diversify is to invest through a managed fund, managed account, exhcange-traded fund (ETF) or\u00a0<a href=\"https:\/\/moneysmart.gov.au\/managed-funds-and-etfs\/listed-investment-companies-lics\" target=\"_blank\" rel=\"noopener\">listed investment company\u00a0<\/a>(LIC).<\/p>\n<p><em>Managed funds and managed accounts<\/em><\/p>\n<p>Managed funds and managed accounts can help you invest across a range of asset classes. Some managed funds and managed accounts offer pre-made diversified portfolios. These usually have the labels of conservative, growth or high growth depending on their asset allocation.<\/p>\n<p><em>ETFs and LICs<\/em><\/p>\n<p>ETFs and LICs provide a low cost way to invest in an asset class or diversify within an asset class.<\/p>\n<p>Most ETFs in Australia are passive funds. These track an asset price or market index, such as the ASX200 or S&amp;P500.\u00a0<\/p>\n<p>Most LICs are actively managed funds and invest in one asset class, such as Australian shares or private equity.\u00a0<\/p>\n<div class=\"smartTip\">\n<p><em>Smart Tip<\/em><\/p>\n<p>Before you invest in a managed fund, managed account, ETF or LIC speak to your adviser and read the product disclosure statement (PDS). This shows you where the fund invests, key features and benefits of the fund, the expected return, risks, fees and how to complain.<\/p>\n<\/div>\n<h3>Keep your investments diversified<\/h3>\n<p>Over time, some of your investments will rise in value and others will fall. This means you could have more money in one asset class than when you started investing. You could also be less diversified. For example, if your shares go up and your bonds fall in price, you\u2019ll have a greater portion of money invested in shares. As shares are higher risk, your portfolio will also be higher risk. If you\u2019re not comfortable with this risk, it\u2019s time to re balance.<\/p>\n<p><strong>How to rebalance<\/strong><\/p>\n<p>You can rebalance your portfolio by:<\/p>\n<ul>\n<li>\n<p>Investing some extra money, such as a tax refund, in an investment you want more exposure to.<\/p>\n<\/li>\n<li>\n<p>Selling some investments and putting your money in other types of investments.<\/p>\n<\/li>\n<\/ul>\n<p>Selling investments will lead to a capital gain or a capital loss.\u00a0<\/p>\n<h3>Get help with diversification<\/h3>\n<p>Finding the right investments can be challenging. If you need some help to build a diversified portfolio, talk to us.<\/p>\n<p><span style=\"font-size: 10px\">Source:<br \/>Reproduced with the permission of ASIC\u2019s MoneySmart Team. This article was originally published at\u00a0https:\/\/moneysmart.gov.au\/how-to-invest\/diversification<\/span><\/p>\n<p>Important note: This provides general information and hasn\u2019t taken your circumstances into account.\u00a0 It\u2019s important to consider your particular circumstances before deciding what\u2019s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete.\u00a0You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.\u00a0 Past performance is not a reliable guide to future returns.<\/p>\n<p>Important<br \/>Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents\/information contained within the linked site(s) accessible from this page.<\/p>\n<p>The post <a rel=\"nofollow\" href=\"https:\/\/mlcsocialfeed.p2.clientcommunity.com.au\/latest-articles\/diversification\">Diversification<\/a> appeared first on <a rel=\"nofollow\" href=\"https:\/\/mlcsocialfeed.p2.clientcommunity.com.au\/\">MLC Contemporary<\/a>.<\/p>\n<\/div>\n<p class=\"wpematico_credit\"><small>Powered by <a href=\"http:\/\/www.wpematico.com\" target=\"_blank\" rel=\"noopener\">WPeMatico<\/a><\/small><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Diversification is an investment strategy that lowers your portfolio\u2019s risk and helps you get more stable returns. You diversify by&#8230;<\/p>\n","protected":false},"author":4,"featured_media":8235,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[15],"tags":[],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.8 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Diversification - Adelaide Private Wealth<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/adelaideprivatewealth.com.au\/diversification\/\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"asim_stellar\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/adelaideprivatewealth.com.au\/diversification\/\",\"url\":\"https:\/\/adelaideprivatewealth.com.au\/diversification\/\",\"name\":\"Diversification - 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