Multi-Asset Investments
Multi-Asset Investments are a popular way to spread risk, especially over the last 20 years, when it has really taken off as an investment philosophy, particularly in the UK.
It is basically investing in different types of asset, with company shares and government bonds being the most common to be held in Multi-asset Funds. Other assets such as Private Equity, Commercial Property and Infrastructure, are now also commonly found in Multi-Asset funds.
The biggest benefit of Multi-Asset investments is diversification. By investing in more than one kind of asset, you can spread risk and improve your potential for returns.
Diversification works as different types of investments often don’t perform in a similar way at the same time. For example, share prices often go up while bond prices are falling, and vice versa. This is due to factors such as interest rates, politics, conflicts, economics and even the weather affecting different asset classes in different ways. What’s positive for one may be negative for another.
Diversification can also help to even out returns and lessen the effects of short-term market volatility. Share prices can be quite volatile and change a lot in a short period of time. Bond prices tend not to move up and down quite as much or as fast as share prices. By investing in both, you can achieve less volatile returns than would come from investing in shares alone.
At Haven Financial Advisers, we can’t predict all the factors affecting how different asset classes perform. But historically, the difference between the best and worst-performing asset classes is substantial. That’s why ‘correlation’ is such an important concept here.
Correlation is the relationship between asset classes. The lower the correlation between two investments, the less similar they are in their behaviour. If they’re negatively correlated, they move in opposite directions, with one rising in value whilst the other falls. If they’re positively correlated, they’ll tend to rise and fall in value at the same time.
If you invest in just one type of investment (for example UK shares), you may be exposed to unnecessary risk. If the stock market fell suddenly, the value of your shares would substantially fall in value. A well-diversified portfolio spreads this risk by holding investments that aren’t positively correlated to shares. In other words, Multi-Asset investments enable you to avoid putting all your eggs in one basket.
At Haven Financial Advisers in Mallorca, we can assist you building your portfolios by investing in Multi-Asset funds run by professional managers, whereby they pool investors’ money together and then divide it between different asset classes. Our clients benefit from the managers’ expertise and their ability to access a wider range of investments than that available to individual investors.
Many Multi-Asset funds include niche investments that need significant research to understand the risks. Additionally, it can be difficult for an individual to buy and sell these kinds of investment quickly. But you can get access to these and the advantages they potentially offer through a Multi-Asset fund.
As with all funds, you’ll pay ongoing investment management charges. These will vary depending on the type of fund you choose. The charge is usually a percentage of the current value of the fund.
There is a wide assortment of Multi-Asset funds to choose from, each with its own level of risk. Whichever route you choose, we’d always recommend that you speak to Haven Financial advisers before you make an investment decision.
Independent Financial Adviser
