- Risk is inevitable when it comes to investing, and managing risk is imperative to protecting one’s wealth. Diversification is a simple yet effective technique of reducing risk, by allocating investments across various asset classes, country or sector. Risks such as inflation, interest rates and exchange rates are associated with every financial asset and cannot be avoided. However, risks specific to a company, country or sector, also known as idiosyncratic risk, can be reduced by diversification
- Unit trusts are one of the best ways to obtain access to a diversified portfolio, as professional fund managers monitor the market on a daily basis and make adjustments accordingly. On average, a fund invests in 50 to 60 holdings, reducing company-specific risks. Investing in 3 to 4 funds will provide even more diversification benefits.
Different Types of Investment Profiles
|Aggressive||Participate in equities growth through asset price appreciation||Looking for potential capital appreciation|
|Balanced||Be exposed to a mixture of asset classes (such as equities, bonds and cash) where the allocation is dynamically managed by professionals to deliver a steady stream of income||Looking to generate a stream of income as the primary objective with capital appreciation as a secondary objective|
|Conservative||Participate in a steady stream of expected interest income while minimising volatility||Looking for stability and some source of income|