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Creating a diverse investment portfolio that suits your situation

ByDave Stopher

Dec 8, 2023

If you’re trying to achieve your future financial goals, regardless of what they may be, it’s often recommended that you diversify your investments

But why is a diversified portfolio so beneficial?

There are many reasons, including:

Risk is essentially lowered just by having investments in different assets, so if one investment performs badly, you still have capital in other assets that could perform well.

You can benefit from the performance of different investments. For instance, a low-risk investment such as a liquid fund can offer a unique way of building your wealth compared to a higher-risk investment in stocks, for example.

Different accounts provide specific allowances better suited to certain goals. You could invest in a private pension for your retirement, whilst also investing in a Junior Individual Savings Account (Junior ISA) to build your child’s wealth.

There are many more benefits of diversification, but it’s safe to say it’s definitely something to consider when building your wealth.

This then leads to the next important question…

How can you create a diversified investment portfolio for your situation?

There are several ways to approach this process, but here are some of our top steps to try for the most successful financial outcome.

Find a financial adviser

Seeking the advice of a financial expert is one of the most beneficial steps in any financial process, particularly for optimising your investments.

Your adviser can assess your entire situation to better determine the right recommendations for building your wealth.

As such, you’ll receive tailored guidance throughout your approach to better refine your decisions.

Lay out a financial plan

If you want to create a diversified portfolio, it’s important to lay out your goals in a detailed financial plan.

This enables you to outline exactly what you want to achieve and when so you can incorporate the right investment strategies to reach these targets.

The more realistic your goals are, the easier it can be to implement achievable investment steps – such as building a certain amount in a pension and an ISA for your retirement.

Constantly adjust your risk levels

Risk is essential when it comes to your investments, so we recommend you constantly review your situation to see how you should be diversifying your portfolio at all times.

For instance, your adviser might analyse your situation and deem a more appropriate approach – like investing most of your capital in low-risk funds, and a small percentage in high-risk assets.

As your situation evolves, you can revisit this plan and adjust it where necessary.

Monitor external factors

Diversification is also important when there are changes in your situation through external factors.

For instance, if there are peaks in inflation and interest rates, certain markets may be affected more heavily than others.

Therefore, you can monitor these impacts to help direct where you could be investing more of your capital to build wealth resilience.

If you’re looking to improve your portfolio diversification, then these steps can be a huge help in creating the right approach for your financial situation.

Speak to a financial professional for a more unique plan on how to diversify your wealth in the right way for you.

Please note, the value of your investments can go down as well as up.