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Reducing risk over time

John Baron explains his approach to portfolio diversification
February 5, 2016

Having outlined my investment strategy as we enter 2016 in last month's column ('Reflecting on a good 2015', 8 Jan), I thought it may be helpful if I explain my thinking behind the portfolios' diversification after the markets' volatile start to the year. I also update investors on a holding as its potential wind-up approaches.

 

Eggs in one basket

The aim of diversification is to reduce portfolio risk by investing in 'uncorrelated' assets - asset classes that tend not to move in the same direction over the same period. Equities, bonds, commercial property, commodities, infrastructure, 'real assets' (such as gold, vintage cars, rare stamps or fine wine) and cash are, to varying degrees, examples.

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