Markets move in ways no one can fully predict. Some investments rise, others fall. For that reason, investment diversification is crucial. It means spreading your money across many different types of investments.
In this blog, you’ll learn how investment diversification helps manage risk. Additionally, you’ll see how returns change each year. And finally, you’ll understand how diversification can help your investment portfolio stay steady during the market’s ups and downs. Our Geelong financial advisors at LBW are here to build your investment portfolio with a clear, simple plan that suits your goals.
Why investment diversification helps steady your portfolio
Economist Harry Markowitz once said investment diversification is “the only free lunch in finance.” This is because it lowers your risk. It spreads your money across many assets like shares, bonds, cash, and property. When one investment does poorly, other investments can help balance the result.
Having the right investment mix depends on your needs and comfort with risk. The Geelong financial advisors at LBW can help you carefully build your investment portfolio. They will guide you towards a plan that works over the long term. As a result, it will help you reduce investment risk and protect your financial future.
Returns change each year, which makes timing hard
What worked in 2024 vs 2022
In 2024, global shares performed best. They rose by more than 20%. Cash and local shares also did well. But not all assets gave strong returns. Global bonds rose by only 2.2%.
In 2022, global shares dropped by 18.1%. That year, cash gave a better return than most other options. Notably, global property fell the hardest, down nearly 24%.
Looking at these two years shows how much results can differ. If you focus on just one type of investment, your financial portfolio might suffer. This is another reason to focus on investment diversification. It helps you manage the ups and downs.
How diversified portfolios make it easier to invest
Some options focus on safety, with more bonds. Others focus on growth, with more shares. You can choose the right mix based off your goals and how long you want to invest.
You don’t need to pick every investment yourself. Some portfolios already include many types of assets in one product. These include shares, bonds, and cash across both local and global markets. Our Geelong financial advisors can help you choose what’s right for you.
Get advice on investment diversification from LBW
If you want to start or review your investment portfolio, we’re here to help. Our Geelong financial advisors can guide you through each step. We’ll help you build your investment portfolio with balance and care.
To learn how investment diversification can work for you, call (03) 5221 6111 or visit www.lbwca.com.au. Together, we’ll set up a clear path to help you grow and protect your money.
This blog provides general educational information only. The content does not take into account your personal objectives, financial situation or needs. You should consider taking financial advice tailored to your personal circumstances.
LBW Business + Wealth Advisors is an Authorised Representative of LBW Wealth Pty Ltd ABN 56 652 382 128 AFSL 534569. Please see our website www.lbwca.com.au or call 03 5221 6111 for more information on our available services.
