You may have heard of your financial adviser sprouting out terms such as asset diversification, different asset classes, Multi-Asset Funds, etc.
What do they mean by this? Perhaps you didn't want to ask in case you felt it was something that you should have somehow known already.
Really what it means, is that you split your exposure and dilute your risk by not only placing your money in one type of asset class.
The different asset classes are:
Each of these classes reacts differently to changes in the economy. If the economy is not growing and shares are more stagnant, Bonds are often growing in value. Cash is consistent but doesn’t allow for much growth above inflation. Property has it’s own ups and downs.
When you are invested in a unit trust portfolio or Exchange Traded Fund, that has this mix, you spread your risk so that your investment doesn’t experience the full fluctuations that only one asset class can exhibit. This can help to ensure that your investment won’t drop as rapidly should the market drop.
You can find more information about this topic at:
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