SEO Header Title

A basic investment principle is that risk is reduced when investments are spread over different sectors. This precess of diversification can be as wide as you like. For example, if your entire portfolio is in technology and biotechnology companies, this would be considered very high risk. It would be safer to diversify into other industries, such as food, or financial institutions. These are considered relatively safe, although perhaps less likely to produce rocketing returns.

As your portfolio grows, and you put more money into it, you might decide that concentrating on the UK market alone is putting all your eggs in one basket on a global scale. You could diversify your portfolio even further by investing in the last growing economies in Asia and the Far East.

All this is about spreading risk. Understanding the nature of risk is essential to good investing. A small, newly-formed company with a whiz-bang product could have amazing potential. You might make thousands if it took off. You might equally lose everything if the fledgling company stumbles along the way. Some people are prepared to take high risk in the hope of high return. Others are happy to take the long, slow road to wealth creation but, it is worth remembering, no investment carries zero risk.