Spreading your risk.

Asset classes and diversification

An asset class is a category of investments, or economic resources, that shares typical features and behaves in a similar way. Each asset type has its own level of risk and return and will perform differently in any given market environment.

Types of asset

Diversification

You may not want to put all your eggs in one basket. Diversifying by choosing different types of investment and asset types can help to manage your exposure to risk. This is because holding a range of assets in different sectors and markets can help to balance out the ups and downs of the stock market, as any poor performance by some investments may be offset by gains in others, which may reduce the risk of loss.

Investing in managed funds can be an easy way to build a diversified portfolio as they tend to include a variety of asset types.


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