How you can diversify your ISA with M&G

24/01/2019

The benefits of having one stocks and shares ISA, or Individual Savings Account, rather than several smaller pots are probably clear. Above all, it makes life easier to have your investments in one place.

Glossary

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Convenient as it might be, though, is this a sensible approach? After all, shouldn’t investors avoid having all of their eggs in one basket?

The answer to this depends on your choice of partner. Where an investment manager offers a wide range of products, or funds, you could combine a number of them to create a well-diversified portfolio.

Why diversify your investments?

The principle behind diversification is to minimise how much you rely on the performance of any single asset, or even type of asset, to realise your investment goals.

Since different assets will perform differently in various circumstances – in other words, some might rise in value when others fall – investing across different asset classes, sectors and regions can reduce the impact of losses.

A diversified portfolio that includes a range of investments, especially those whose performance is unconnected, can help give your portfolio a more consistent level of performance over time.

Effective diversification involves picking the right blend of assets to navigate the ups and downs of the markets.

What can a mix of funds offer?

Each fund will invest across a number of assets, but will often focus on one asset class and sometimes on a single region. Alone, therefore, they typically only offer limited diversification.

By investing in several funds, which between them cover a breadth of underlying assets, you can create a more effectively diversified portfolio. Some funds look beyond the most widely held asset classes, being bonds and company shares. Investing in alternative asset classes, such as commercial property and infrastructure, can add further diversification.

Holding a range of funds can not only offer more assets, but also a plurality of approaches. Embracing different styles of investing in your portfolio can also add diversification. Not only do fund managers have their own perspectives, but each fund has its own objective – to pursue a rising income or capital growth, for instance – as well as its own risk-return profile.

Some funds specifically set out to deliver positive returns whatever the market conditions, or aim to diffuse specific threats like rising inflation or interest rates. Strategies that look to navigate uncertainties could play a helpful role as part of your wider basket of investments, depending on your priorities.

How much can you diversify with M&G?

Whatever phase of investment you are in, from accumulating your savings to drawing them down, there is always a valuable role for effective diversification.

M&G offers a range of over 40 funds, each with their own investment objective and style, across an even wider breadth of assets than those mentioned here. When you invest through an M&G ISA, you can choose from the full range of M&G funds that are available to UK investors.

As with any investment, it is important to check whether the strategy and underlying investments of any fund, or combination of funds, match your attitude towards risk and return. If you are unsure whether any fund is suitable for your needs, please seek independent financial advice.

Important information

We are not able to give any financial advice. The views expressed in this document should not be taken as a recommendation, advice or forecast.

When you're deciding how to invest, it's important to remember that the value of investments does go up and down. This will cause fund prices to fall as well as rise and you may not get back the original amount you invested.

Please keep in mind that the tax rules for ISAs may change in the future, and their tax advantages depend on your individual circumstances.