Can you diversify your portfolio with a single fund?

Hi. I have some good news and some bad news!

Let’s start with the good news. There is something which can help and it’s called a multi-asset fund. As the name suggests, it has lots of things in it from different sectors and regions. Two very well-known brands in this space are Vanguard LifeStrategy and BlackRock MyMap.

All you need to do is to pick which blend you want, if the measure is volatility. The bumpier the ride, the more alarming it can be but the more you are likely to make over the long term.

This is usually measured by the % you have in shares. 100% equity (equities are just shares) = very bumpy, some years might make you feel a bit ill, but over 7+ years you should do better. During the financial crisis, a 100% equity multi-asset fund might have gone down around 30% at one point. But in the next year it pretty much recovered. And then went up again.

If you pick the other end of the spectrum, that’s 20% equity. This will behave like cash with a little small bit of occasional oomph. Fewer ups and downs, but it won't work as hard over the long term. It’s like stock market Ribena which has been really watered down with safer stuff like cash. So the flip side is that it is a bit more bland.

Do think about this one based on timeframes. And if you have long timeframes for this money (always remembering you can take out money from an ISA when you want) then don’t just chicken out and pick the middle risk option one. Pick the right ‘risk profile’ for you!

Another option your wife has is to look at a firm which has some ready-made options. Monzo is decent is she has an account here. Nutmeg is another option, owned by JP Morgan. These will do a lift of the heavy lifting for her.

Now. This can feel complicated for those newer to investing. So if that’s you, and you just want to invest in a really big collection of shares from loads of different areas, look at a global index fund. Fidelity Index World is very popular. Or iShares MSCI World ETF is another (ignore the letter gobblegygook). These have over 1,000 companies in them and can be a set and forget way to invest. If you have small sums of money (£100 here and there or a lump sum of a few £1,000) then I’d look at a fund. Set up a direct debit if you can. Little and often.

If you have larger sums then look at an ETF as the cost of holding this will usually be lower – but you’ll be charged between about £5 and £10 every time you buy a bit which is why if you’re topping up regularly it can get expensive, especially for smaller sums. You don’t want to be losing £10 or every £100 monthly contribution to transaction costs.

I’ve shared the good news. Now the bad news. These options wont always perform phenomenally well. And you have to be prepared for some red numbers, to feel that you’ve made a mistake, and to think that Holly is a wally at some point – because there will be bad patches. It happens. But over the long-term I think this is a very sensible way to invest for less confident people. You just mustn’t chicken out and sell when the headlines are all hysterical. Which means I’d only do this if you know this is a long-term savings pot which you can leave alone for 7 years +.

The volatility risk is not minimal this way. We’ve covered this. But the risk of your money being nicked by a shady set-up are removed as the names I’ve mentioned are global powerhouses. The risk of one sector or country going horribly wrong are removed as your money is in lots of different baskets. The risk of cybercrime are lowered (but not removed) as these firms are well governed. So it’s as risk free as any investing ever gets but just to be super clear – there will be good days and there will be bad days and things go down as well as up!