Portfolio management

1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21   

9. Diversification: countries

This is the least important of the five key types of diversification. You could get by without bothering about it at all. But it is well worth considering, because it may actually help you raise your returns, while lowering your risks.

In the long run, countries' stock markets tend to grow in line with their economies. The appeal of investing abroad is that many countries are set to grow faster than Britain.

Another potential benefit is that foreign stock markets may not move in the same way and at the same time as the Footsie. This will help to protect your portfolio whenever the UK market turns turbulent. It will also cut your risk by reducing your heavy dependence on just one market.

Of course, foreign investments carry the risk that the currency they are denominated in may weaken. On the other hand

• there is also a chance it may strengthen, further enhancing your returns
• if you wish, you can diversify between countries to reduce currency risks.

The next question is: Should you buy individual shares or unit and investment trusts?

The European market is becoming more accessible, now that the Euro is a dealing currency. However, if you wish to invest in foreign markets other than the US, you may want to confine yourself to unit or investment trusts.

Thankfully, these are straightforward to research and deal in. The best source of information on the internet is Trustnet. This is a free site which enables you to list and compare trusts by country, sector and performance over various timeframes. It also gives full contact details for sellers of unit trusts. Investment trusts you can buy and sell via your broker, just like any other listed shares.

1. First things first 2. Should you invest before paying off your mortgage? 3. Do you want growth or income? 4. Diversification: summary 5. Diversification: Safe custody 6. Diversification: asset allocation 7. Diversification: shares 8. Diversification: sectors 9. Diversification: countries 10. Balancing your portfolio 11. What should you hold where? 12. Tips for married couples 13. Lump sum or drip feed? 14. The role of cash 15. Rebalancing your portfolio 16. What to do with dividends 17. All about bonds 18. What to do if you inherit a portfolio 19. Benchmarking performance 20. Setting up a portfolio spreadsheet 21. Conclusion

• One Up on Wall Street