Importance of Asset Allocation
Asset allocation refers to how the money in a portfolio is spread, or diversified, across investment sectors.
These sectors, or asset classes, include cash, bonds, property, shares and alternative assets, both in New Zealand and overseas.
Research shows that asset allocation can have a major impact on the returns a portfolio achieves.
To ensure an investment portfolio achieves the desired results over the longer term, it is important that the asset allocation used in designing the portfolio is appropriate for you and your tolerance to risk. We ensure your risk is managed by diversification at a number of levels:
- Your investments are diversified across appropriate investment sectors.
- Within each investment sector, we diversify across a number of investments. For example, if investing in New Zealand shares, we may prefer to use managed funds that invest in at least 15 – 20 companies, rather than investing in just 3 or 4 companies alone.
- We diversify across specialist investment managers, each chosen for their particular area of strength or expertise.
- By investing globally we help ensure you are not too tied to the fortunes of any single country, economy or currency.
By having a spread of investments at each of these levels, we reduce risk by minimising the impact of underperformance in any single area on your overall portfolio. A good spread of investments also widens the scope of opportunities you can participate in, thus increasing the potential for you to achieve your goals and objectives.