Why it pays to invest widely
When you’re stepping off the sidelines and starting to invest, there’s one word that’s very important to keep in mind – ‘diversification’. It sounds complicated, but it’s really a simple idea. You don’t want to put all your eggs in one basket. In investment terms, this means spreading your money around different investments rather than focusing in one area.
Investment performance over the years
The easiest way to see why diversification matters is to look at how different investments and asset classes perform over the years. We’ve put it in a very colourful chart to help you see what has happened. There’s cash in there as well, so we can show you how its performance compares with other investments (we talked about this in the article The power of long-term investing).
Looking at the chart, you can see that asset class performances vary across years, for a number of reasons. It is near impossible to predict which asset class will outperform from one year to the next.
Source: Morningstar, BNP Paribas Asset Management. US dollars. Shares invested in another currency may be exposed to exchange rate risk. Past performance does not predict future returns.
Adding diversification to your investments
Adding diversification to your investments means choosing a selection of assets that don’t all behave in the same way. So, if one part of your investment portfolio is falling in value, others may be flat or rising, which might balance it out – or even mean you still see growth overall. This can potentially help limit the impact of downturns, recessions or just routine fluctuations in specific markets.
Of course, it is important to remember that past performance is not a guide to the future, so there’s no guarantee that investments will continue to perform in the same way in the years ahead. However, we hope this helps show you the value of remembering diversification when you start investing.
Example: a global multi-asset fund
We want to highlight an example of an investment option that might help you dip your toe in the water. You still need to check everything carefully and make sure whatever you choose is right for you, but this is one way you could begin your investment journey.
A global multi-asset fund invests across multiple types of assets from markets around the world. This means it gives you an easy-to-understand way to benefit from a range of opportunities. A team of investment experts makes all the decisions, including what asset types to focus on and what investments to use. This brings the potential for outperformance, but the costs tend to be higher as well.
Please keep in mind that the value of your investment, and any income from it, can go down as well as up and you may not get back what you originally invested.
Don't sit on your cash
We understand why people want to keep some of their money in cash, but you might be missing out on potential opportunities to make more of your savings over the longer term, and help you achieve your objectives.
Download the guide
The power of long-term investing
Investing can be daunting if one considers short-term market movements, but a longer-term perspective can help you look through volatile periods. Investing can be daunting if one considers short-term market movements, but a longer-term perspective can help you look through volatile periods.
The power of long-term investing
Investing can be daunting if one considers short-term market movements, but a longer-term perspective can help you look through volatile periods. Investing can be daunting if one considers short-term market movements, but a longer-term perspective can help you look through volatile periods.
The power of long-term investing
Investing can be daunting if one considers short-term market movements, but a longer-term perspective can help you look through volatile periods. Investing can be daunting if one considers short-term market movements, but a longer-term perspective can help you look through volatile periods.
The power of long-term investing
Investing can be daunting if one considers short-term market movements, but a longer-term perspective can help you look through volatile periods. Investing can be daunting if one considers short-term market movements, but a longer-term perspective can help you look through volatile periods.