Diversification is a key principle in investing, helping to manage risk and improve long-term returns. For UK investors, there are several ways to achieve diversification using domestic assets.
1. UK Equities
Investing in UK company shares, especially across sectors like finance, healthcare, energy, and technology, can provide broad exposure. Use FTSE 100 or FTSE All-Share index funds to gain instant diversification.
2. Bonds and Gilts
UK government bonds (gilts) and corporate bonds offer stability and income. They can balance equity volatility and are available via bond-focused funds or ETFs.
3. Real Estate Investment Trusts (REITs)
UK REITs allow you to invest in commercial and residential property without buying property directly. These are traded on the London Stock Exchange and offer regular income through dividends.
4. Infrastructure Funds
These funds invest in UK infrastructure projects (roads, hospitals, renewable energy), often with inflation-linked returns. They can provide diversification and a steady income stream.
5. Alternative Assets
Consider peer-to-peer lending, crowdfunding platforms, or commodities-based funds that focus on UK markets. These assets can behave differently than stocks or bonds.
Portfolio Tips
- Use funds or ETFs to access multiple assets easily.
- Rebalance periodically to maintain your desired asset mix.
- Don’t forget cash savings or premium bonds for short-term needs.
Conclusion
Diversifying within UK-based assets is a practical way for domestic investors to reduce risk while staying close to familiar markets. A well-diversified UK portfolio can serve as a solid foundation for both growth and income.