Don’t put all of your eggs in one basket’, a saying that has been passed down for many generations. It can be applied across a number of situations, but none more so than asset allocation. Often when it comes to investing there is an area that we might be more confident in. You might have more experience or knowledge in that area, or have had success in the past. You could fall into the trap of investing all of your money in this area because it makes sense to focus on what you know and where you are getting a good return. But all investments can be volatile at times and in order to provide protection and insurance to your wealth you must diversify your portfolio.
Different assets will perform differently over time and throughout the investment cycle. By having a variety it means that if one area is underperforming you can make it up with another that is performing well. If you had all your money in an area that was affected by a significant decrease you could lose your money and it may take time to recover.
While diversifying may mean you aren’t always chasing big returns, it will hopefully provide you with a steady investment return.
The main areas you can invest your money in
Here are the 5 main areas that you can invest your money in and we share the pros and cons of each of these: