How Can a Diverse Portfolio Help to Secure your Finances?


If a recent survey by the British Chambers of Commerce is to be believed, the UK economy has been mired in a significant rut thanks to Brexit. Companies in the services sector are also thought to have largely given up recruiting employees, which is concerning given that this niche accounts for 76% of the UK’s GDP.

This is also bad news for investors, who are seeing their portfolios impacted by considerable economic volatility. As a result, it’s exceptionally difficult for risk-averse investors to make their mark and generate returns in the current economic climate.

However, investors can manage their risk successfully by investing in a diverse and balanced portfolio. We’ll explore the benefits of this below and ask how it can help you to secure your financial future.

Debunking the Myths Surrounding Secure Finances

For many, the safest vehicle in which to save their hard-earned cash is a bank account. After all, this type of investment typically delivers a modest but consistent return, in line with the individual savings rate and the amount of money that you commit over time.

This is not always the case, however, and this has been borne out in the recent macroeconomic climate. More specifically, we’ve seen the Bank of England implement two incremental base rate hikes during the course of the last year or so, increasing it from 0.25% to 0.75% in the process.

While banks have been quick to apply the full value of this increase to variable rate mortgages and similar products, however, very few have passed it onto their individual savings account. At best, a handful of banks have increase selected savings rates by 0.01%, which is disproportionate when you consider the sudden increase in the cost of living.

With this in mind, savings accounts are continually losing value and increasingly incapable of delivering the necessary returns on your investment. With the rate of inflation also growing at a faster pace than earnings in the UK, it’s clear that people are also struggling to commit their money to savings in the first place.

Why a Diverse Portfolio can Negate this Risk?

Of course, it’s still possible to save a portion of your disposable income in selected accounts that offer a higher than average return. However, you should also look to spread your income across a diverse array of assets which can provide higher potential returns, as this increases the likelihood of your savings beating inflation while also reducing the amount of investment risk you are taking.

The key is to determine which investments have the most potential to give you a good return, and finding the combination of different types of investments that best fits your individual goals, requirements and attitude to risk. This can be challenging in an evolving market that is constantly producing new and innovative products.

To help you on your way, you should consider liaising with a reputable financial adviser. More specifically, we’d recommend that you use a service provider that can deliver comprehensive financial advice across a range of different topics, with companies such as Tilney fitting this description.

This will allow you to build a balanced and diverse investment portfolio, and one that perfectly complements an holistic and overarching financial plan.

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