Even if you are a sophisticated investor, one of the most important tools available is diversification. Whether the market is bullish (rising) or bearish (falling), maintaining a diversified portfolio is essential to any long-term investment strategy.
Volatility is less frightening if you take a longer-term view
Although past performance is no indicator of future performance, market corrections can be healthy and result in even stronger growth in the future. This is why holding a diversified portfolio for the long term makes good investing sense. It’s time invested in the market, and not the timing of the market, which dictates long-term returns.
If you feel you do not have the time, knowledge or inclination to manage your own portfolio of investments, you can delegate responsibility for managing your money to a professional fund manager. Funds are collective investments, where your and other investors’ money is pooled together and spread across a wide range of underlying investments, helping you spread your overall risk.
Collective investment schemes are a way of combining sums of money from many people into a large fund spread across many investments and managed by a professional fund manager. Your money is invested on a pooled basis by an investment manager in return for a fee.
Market index following the overall performance of a selection of investments
Tracker funds and exchange-traded funds (ETFs) are investments that aim to mirror the performance of a market index. A market index follows the overall performance of a selection of investments. The FTSE 100 is an example of a market index – it includes the 100 companies with the largest value on the London Stock Exchange.
