[ADVISOR VIEW] Different asset classes and the risks attached to them: Maria Smit - BrenthurstSA. Moneyweb Investing
Investment diversification aims to reduce risk by allocating investments across various asset classes and securities. The rationale behind diversification is that different asset classes tend to have different risk-return profiles and may perform differently under varying market conditions. By spreading investments across multiple assets, investors can potentially reduce the impact of a single investment’s poor performance on their overall portfolio.
Investing in equities offers the potential for capital appreciation and dividends. Equities are generally considered higher risk but can provide higher returns over the long term. If it weren’t for that volatility, more investors would have put all their wealth into the equity market where they can generate the largest returns. But it’s possible for an equity portfolio to temporarily lose 20% or 30% of its value very quickly.
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