Building a diversified portfolio
Informed Choice chartered financial planner Martin Bamford is quoted in an article on the Mindful Money website, looking at how to build a suitably diversified investment portfolio.
“Determining a suitable asset allocation really comes down to understanding how each asset class behaves and what the impact of blending different asset classes has on the overall volatility and returns of the portfolio,” explains Martin Bamford, a Chartered Financial Planner at Informed Choice Ltd.
When asked what a reasonable asset allocation for different types of investors might look like, Martin replied:
Bamford says that for an adventurous investor with a 15 to 20 year time horizon they would typically recommend around 25% in cash and fixed interest, with 70% in equities and 5% in commercial property.
The article then goes on to look at how frequently portfolios should be reviewed.
Bamford says that for the majority of their clients, an annual review is what they need and keeps their portfolios suitably invested over the long-term. “More sophisticated investors and those with larger portfolios will want to review things either half-yearly or quarterly.”
Talking about fund selection within a well diversified portfolio, Martin commented:
“Using passive funds or ETFs makes sense for this as you will get a minimal tracking error and a low cost of investing,” explains Bamford.
“Both approaches have merit and investors might choose to use both tactics within a single portfolio to get the best results,” notes Bamford.
You can read the article in full here.