Friday, February 19, 2010

Geoff Birch on diversification investment strategies for expats

This month I thought we’d take a look at diversification. There was a time when diversification was putting some money in UK equities and some in European equities, and that was later expanded to Emerging Markets equities too but those days are long gone due to the creeping influence of globalisation and the interlinking of most things financial these days. Today we find that a problem with the Greek economy can threaten the stability of the Euro, the whole European banking sector and weigh on equities around the globe. We find that property is not immune to recession nor banking crisis and we find that government bonds from previously supposed safe havens are not now rated as highly as we had thought. So what can we do?

Nowadays we have to build portfolios with real diversity and it is not easy. We have to have assets that work in shifts rather than all at once. This leads to its own problems because as I had to keep reminding some clients last year when they said “most of my funds are flying, but this one/two is not, shall we dump it/them?”, the very reason we bought them was because they wouldn’t perform when all the others do. They are intended to perform when the others stop performing and to act as portfolio insurance...

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