Since Easter is traditionally associated with renewal and new beginnings, now could be the perfect opportunity to reflect on your investments – specifically whether your portfolio is made up of suitable, well-diversified holdings.
Just as an Easter egg hunt involves finding a variety of colourful eggs nestled in different locations, a well-diversified investment strategy spreads your assets across various sectors and geographies to mitigate risk and enhance potential returns.
The problem with putting all your (investment) eggs in one basket
When it comes to your investments, the adage “don't put all your eggs in one basket” is a helpful reminder to avoid concentrating your investments in a single asset or sector.
Putting too much weight on one stock, sector, or asset class could expose you to more risk than you are happy with.
Recent events have put a spotlight on the importance of diversification
In January 2025, when President Trump commenced his second term in the White House, the markets responded positively.
However, as Trump began to introduce tariffs on imports from various countries, including China, Canada, and Mexico, markets reacted badly.
The intent behind the tariffs is to protect US domestic industries, yet the announcements on what Trump dubbed “Liberation Day” triggered significant declines in global stock markets, with major indices falling sharply.
The tariffs introduced a wave of uncertainty, affecting sectors differently.
Industries with high foreign revenue exposure, such as technology, materials, and energy, faced increased risks. Meanwhile, defensive sectors like healthcare and utilities, less affected by international trade tensions, showed resilience.
This divergence is just one timely example of how a diversified portfolio could help cushion the impact of geopolitical events.
Diversifying where you invest your wealth depending on your appetite for risk and long-term financial goals can help smooth returns, and soften the blow when markets experience extreme volatility.
3 reasons diversification is key
A diversified portfolio spreads investments across various asset classes, including stocks, bonds, real estate, and alternative investments. And a well-diversified portfolio can help you:
1. Minimise risk and increase potential returns
Diversification spreads risk and helps to limit the impact of market volatility on your investments. When one sector, asset class, or geographical area falls, a rise in another area could help to offset the loss.
2. Provide greater opportunity for returns and eliminate investment biases
Diversification can help prevent you from falling foul of investment biases. You may be overly confident about the performance of sectors you know, or geographical regions that you're familiar with. These unconscious biases could see you miss out on potential growth, whereas a diversified portfolio won’t be constrained.
Read more: Home bias could inadvertently harm your investment strategy. Here’s why
3. Help you to consolidate gains
As your investment goal approaches, you might want to consolidate your gains. Diversification allows you to do this by rebalancing your portfolio, potentially increasing the number of lower-risk assets you hold.
This could help to avoid the value of your investments suddenly falling in value when you need to withdraw funds.
Your financial planner can help ensure your portfolio is well diversified
Understanding how best to diversify your investments can be complicated.
An expert financial planner can assess your financial goals, risk tolerance, and investment horizon and design a portfolio tailored to your specific needs.
Your Alexander Peter adviser will also regularly revisit your investment portfolio to ensure that you hold investments in the right balance, in accordance with your needs and goals.
By spreading your investments across different sectors and geographies, we’ll help you navigate the uncertainties of the global market and make sure your portfolio is geared towards achieving your long-term financial goals.
Get in touch
To find out more about how we can help you profit from a well-diversified investment portfolio, get in touch.
Email enquiries@alexanderpeter.com or give us a call on +44 1689 493455.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
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