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How should I diversify my portfolio?

26 October 2021

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Question by Gill

Hi, I started investing about 6 months ago and manage various ISAs, SIPPs and JSIPPs for the family. It's exhausting and I really want to get things set up so they can just run - but I don't think I've got the right sort of diversity in a couple of them that are more than just using Vanguard Life Strategy and BG Managed funds.

I've read loads and loads and get the need for diversity...but what proportions would actually equate to a really well rounded portfolio? I've read that 35% US and 20% UK is pretty standard, but what about Europe, Asia, Japan, China and emerging markets? I'm essentially at that point of having read so much I'm not sure what the right answer is! So many global funds I look at aren't really global, but seem to have 50% at least focused on the US and UK - which I guess amounts to the numbers detailed above. I just want to get this right so that if things go array, at least I've got the theory right! Thanks a mil in advance. Gill.


Answered by Fraser Kerr

Hi there Gill,

Thanks for your question and hopefully this answer can be of some benefit to you and your family!

Absolutely, diversity is so important both in terms of maximising the potential for growth within your invested assets but also with regards to minimising any downside. The important factors to understand are with regards to the level of risk that you are willing to take and then looking to take this one step further through your capacity for loss. This would be from a hard facts perspective in terms of financially but also emotionally - what you would be willing to tolerate.

Many different fund houses and organisations will vary with their asset allocations in the search for creating growth for their clients and it could be that one of the managed funds that you have mentioned above that are risk rated, such as the Vanguard LifeStrategy or abrdn MyFolio range would be best suited to you. This way you are looking at agreeing your risk tolerances and then allocating to a fund group to manage within these thresholds. I think it would be remiss of anyone to propose a breakdown of assets for you to adopt and manage without having a more complete and thorough understanding of your overall position, aspirations with the funds and time horizon for the investments.

Hopefully this has helped to provide some further context to your question and I really would be happy to talk further on the matter as i am aware of the potential vagueness with my answer as a much more comprehensive understanding of your situation would be required to assess better the above.

Hope to speak soon and have a lovely weekend when it comes.

Best Regards,

Fraser

Answered by

Fraser Kerr

Financial Planner & Regional Director

I’m a Regional Director with abrdn Financial Planning. We offer free planning support and specialist financial advice across the UK, to help you make the most of your money for your life. I support individuals, couples and families to set and achieve their goals, giving them confidence and peace of mind for the future.