Six key steps to long term investing
2.Diversify
Put simply, this means using a mix of different investment types (ie cash, bonds, property and stocks & shares) within your portfolio. By not ‘putting all your eggs in one basket’, you reduce the overall risk of your portfolio while still aiming to achieve the best potential returns.
This is because at any time, if one investment type isn’t performing well, another is likely to be doing OK. This will smooth out your overall returns over time by reducing the ups and downs along the way.
A well-diversified portfolio is the best way to help you reach your long term financial goals while minimising the risk along the way. It could consist of some risk-free cash products right through to higher risk stock market funds. How much you invest in each would depend on your goals and matching the risk you’re prepared to take with the riskiness of the underlying asset.
You can spread your investments in a number of ways including:
- Across assets – make sure you have a balance between cash, stocks and shares, property and bonds
- Across countries or regions – why narrow your investment opportunity to the UK only when you can tap into the growth potential of the world!
When times are tough in markets, the trick is to avoid the temptation to hide your money under the mattress. Check your savings and investments with a financial adviser to make sure you have a good balance.
