Diversify your investments to manage risk
Portfolio diversification is an effective strategy to manage risk. Managed funds offer several ways to diversify your investments.
You can diversify by:
- Asset class: The 6 main asset classes include international shares, Australian shares, international fixed interest, Australian fixed interest, and listed property and cash
- Country or region: Australia makes up only 2% of the value of the world's markets. International markets offer immense opportunities for greater diversification
- Industry or sector: Certain market conditions are more favourable for some sectors than others. For example, the mining sector may be booming while agriculture is struggling, Banking and Finance might be steady while Information Technology is taking off
- Individual security: There are thousands of companies, bonds and properties to select from. Investing in one or a handful of individual securities is a lot more risky than investing in a wide range
- Investment manager: Investment managers have their ups and downs and use different management styles to manage their portfolios. It makes sense to diversify by investing with more than one
- Management style: Investment managers have different styles for deciding where to invest as this table explains.
| Investment style | Description |
|---|---|
| Growth | Targets companies where earnings are growing faster than the market average. Typically rewarded with a higher share price. |
| Value | Targets shares that are temporarily priced below their intrinsic long term value. |
| Core |
Targets shares based on their relative merits:
|
This information is general in nature and is not intended to constitute a securities recommendation, financial or taxation advice. Before making any investment decisions, we recommend you consult a financial adviser and an independent taxation adviser to take into account your particular investment needs, objectives and financial circumstances.
Westpac Financial Advisers are authorised representatives of Westpac Banking Corporation, a licensed securities dealer.
