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Asset allocation

Getting the right balance of different assets in your portfolio is a process known as asset allocation.

This is based on long-established and well-proven mathematical principles. Its aim is to make sure that the peaks and troughs in the performance of the funds within your portfolio balance each other out over time in a way that is optimised for your risk profile.

Only after establishing the right combination of assets to match your risk profile will your adviser recommend the most appropriate funds and the most tax-efficient ways for you to hold them in your portfolio.

Planning a portfolio to match your risk profile

Your financial adviser will measure your investment risk profile by means of a questionnaire. Depending on your answers, you will be given a risk rating between 1 (low) and 10 (high). Your financial adviser then uses that rating as the basis on which to build a portfolio to match your expectations.

There are around 1,000 funds available for you to invest in on the platform, each with their own objectives and characteristics, so it’s important to make the right choice.

Diversify your assets

It’s a well-known principle of investment management that one of the best ways to manage risk is through diversification. That way, if one of your investments is underperforming, its losses can be balanced by gains from another. There are various ways to diversify your investments, one of which is by asset class.

The funds available for you to invest in are categorised under a number of major asset classes depending on their particular focus. Asset classes include cash/money markets, UK fixed interest, international fixed interest, property, UK equity and international equity.

Different types of assets have different performance characteristics. Your financial adviser will aim to get the right mix of funds in your portfolio to match your particular risk rating.