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Diversify Your Portfolio

How to diversity your investment portfolio.

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16 views

Diversify Your Portfolio

How to diversity your investment portfolio.

Uploaded by

taixs
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Diversify your portfolio

Don’t put all your eggs in one basket

I read some articles


Some investors may argue that if all their money was to be placed into one
that stock markets
good investment, they would get the highest profits. However, even for
will be the best
the smartest investors in the world, it is difficult to predict which
performer of the year.
investments will deliver the best returns in the future. In reality, the
Why not put all my
performance of each investment varies over time. If an investor chose a
money in it to achieve
single investment trying to achieve the best performance, it may result in
the highest potential
an unexpected outcome.
return?

Although I can see


A well-diversified portfolio is your good defense against market
my money growing, I
swing. If an investment is made in only one investment, the outcome
don’t feel comfortable
tends to be more volatile and the risk is higher. Instead of focusing in one
with how often I see
investment, you can spread your money across a number of investments
negative returns in my
that are not alike. A diversified portfolio aims to reduce risk by allocating
investments. How can
investments among various financial asset classes, currencies and
I have a more stable
geographies, thus seeking for a more stable and smoother experience.
portfolio?

To diversify, the portfolio has to have investments that complement


each other and react in different ways to market movements; in
financial terms, investments that have “low correlation”. When a portfolio
How does is constituted of investments that are not closely associated, factors that
diversification work? cause losses in one of the investments may not result in a same downturn
to the performance of the other investments in the portfolio (and in some
cases even produce a positive return), offsetting the adverse effect that
the former has.

To achieve a truly diversified portfolio, you may have to buy many


different individual stocks and bonds, which can be quite costly and
I have limited amount
difficult to manage. By purchasing equity or bond funds, you can achieve
of money to invest,
diversification without the need of large amount of money. Multi-asset
how can I build a
funds also aim to help investors achieve stable and repeatable
diversified portfolio?
returns under different market conditions by investing in a diverse
mix of asset classes and styles.
An alternative way to diversify:
The core-satellite approach
Core-satellite approach seeks to find an appropriate balance between diversification and maximising potential returns.
A portfolio built under this approach consists of two segments: core and satellites. The Core portfolio is the central portion
and should be well diversified across different asset classes, so as to help protect investors during market downturns, while
participating in positive markets. It could be a multi-asset fund. Meanwhile, the Satellites give investors the opportunity to pursue
market-driven and shorter-term investment ideas, aiming to take advantage of market trends of special investment situations.

Commodities Market
Sectors

Gl
Do al A
ob
me lloc
Inc ixed
e
om

sti at
F

c & ion
Core
Real Estate Long-term Currencies
Investments

Cash &
Equivalents

Market
International Capitalization

Investment involves risk and past performance is not indicative of future performance.
The document is prepared for general information purposes only. All views expressed cannot be construed as an offer or recommendation by HSBC Global
Asset Management (Hong Kong) Limited (“AMHK”). AMHK and HSBC Group shall not be held liable for damages arising out of any person’s reliance upon this
information. Any person considering an investment should seek independent advice on the suitability or otherwise of the particular investment. AMHK has based
this document on information obtained from sources it reasonably believes to be reliable. However, AMHK does not warrant, guarantee or represent, expressly or
by implication, the accuracy, validity or completeness of such information.
Issued by HSBC Global Asset Management (Hong Kong) Limited

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