Why should I diversify my portfolio globally?

01 Jul 2019

With the instability in markets, especially around Brexit, the Pound and US-China economics, investors are steadily becoming more and more uneasy and not sure what to do about their investments. Do they keep it as is and ride out the turmoil hoping to come out the other end unscathed, or reduce risk and diversify their portfolios to include other global markets? 


“Sterling-based investors can and should protect themselves from this by ensuring wide geographic distribution of assets” - Tom Elliot, International investment strategist from deVere Group on the pending Brexit deal and UK’s future economic outlook.


What is Global Diversification?
The financial dictionary defines Global/International diversity as: 

The attempt to reduce risk by investing in more than one nation. By diversifying across nations whose economic cycles are not perfectly correlated, investors can typically reduce the variability of their returns.

In the past, assets were invested in the main economic markets such as the UK, EU and the US, etc.  Not all global markets are affected by what happens to these heavyweights. 

By spreading your investment over other global economic markets as well, you are decreasing your risk. For example, If you are invested in three markets and one doesn’t do so well, then you have 1/3 loss as opposed to investing in 7 markets where your loss is only1/7.

It’s the proverbial saying ‘don’t carry all your eggs in one basket’.

Benefits

  • Your risk is mitigated as it is spread out over more markets
  • More stability for your investment in the long term – Short term unstable economic events in certain markets are buffered by other unaffected markets in your portfolio

“strong UK inflation data should urge investors to reduce UK asset exposure and take a more international approach to investing.” Nigel Green CEO deVere Group

Options available 
International markets in Asia and the Middle East like Japan, UAE and Qatar, and emerging markets like India, Russia, and Brazil, have been doing favourably and more and more investors are spreading their investments to include these markets.


deVere Group offers an international investment strategy that aims to provide clients with a comprehensive picture of the global economy and regular updates on the current stock market and fixed income trends, in order to assist investors in making informed investment decisions.
The chart below shows a typical long-term balanced portfolio based around 60% global equities and 40% global bonds
 
Speak to your deVere consultant today about diversifying your portfolio and lowering your risk or contact us on [email protected]

Articles on Diversifying your UK investment:

http://www.nigel-green.com/2019/03/19/brexit-has-caused-significant-damage-to-uk-financial-services-irrespective-of-what-happens-now/

https://www.vanguardinvestor.co.uk/articles/latest-thoughts/investing-success/how-many-funds-do-i-need

https://www.schwab.com/resource-center/insights/content/why-global-diversification-matters