Don’t put all your eggs in one basket. Diversification allocates your investments into a variety of asset classes, geographies and sectors, to build a portfolio with a variety of investments that have different expected risks and returns. This can reduce the risk in your portfolio and achieve more stability.

• Manage and reduce risk through diversification – if one investment underperforms, this may be offset by other gains
• Ensure your portfolio has a variety of asset classes and investments that have low correlation to each other

Building a diversified portfolio:

• Start with a diverse Foundation Portfolio using our Tactical Asset Allocation as a guide, to deliver longer term returns over investment cycles
• Personalise your Foundation Portfolio by adding short term Opportunistic ideas to enhance returns or diversify further

The relationship between risk and return is important in making sound financial decisions. Understanding what risk you’re willing to take, and how best you can manage these risks, helps maximise returns on your portfolio.

• Higher investment returns typically involve taking a greater level of risk
• Weigh the amount of risk you are willing to take against the potential return to decide if it’s worth it

Managing risks:

• Understand the risks in your portfolio and manage these risks on an ongoing basis
• Ensure you have sufficient diversification to reduce risk and the chances of loss if your investment underperforms
• Have regular portfolio reviews and rebalance to ensure your portfolio remains aligned to your risk tolerance and return expectations