Diversification:
The aim of diversification is to reduce investment risk by combining different asset classes, such as stocks, bonds, cash and alternative investment strategies. Diversification aims to reduce volatility as, in general, asset classes, industries and individual companies tend not to rise or fall in value at the same rate or at the same time. Diversification may reduce the upside or downside potential of your portfolio, but it does allow for more potentially consistent performance under a wide range of economic conditions.
Asset allocation:
A disciplined investment process is essential in constructing a well diversified portfolio for you. Asset allocation is one of the most fundamental decisions we will make with regards to your portfolio. Any security specific decision we make is preceded by an asset allocation decision. Current research indicates that the asset allocation structure of portfolios accounts for approximately 90 % of the variation in returns over time.
For the purposes of asset allocation, we carefully analyse world economies, market sectors, then any individual stocks and bonds within those markets.
Our core philosophy is that over the long term, equities have outperformed cash. Therefore to hold only cash in the long term may be a risk that results in underperformance. However, on a short term basis we may substantially increase our cash allocation in a portfolio if market conditions necessitate.