How to diversify your portfolio?

Diversification is based on a simple idea: when one asset loses value, another may gain. For example, when equity markets decline, bonds may perform more resiliently, helping to limit losses across the entire portfolio.

By spreading your investments in a thoughtful manner, it becomes possible to benefit from different market dynamics. While it is not without risk, portfolio diversification offers several advantages.

• Improve the risk/return trade-off: diversification makes it possible to achieve better performance for a given level of risk by combining assets that do not react in the same way to the same events.
• Access to new opportunities: certain markets or sectors may perform better at different times, depending on economic cycles.
• Greater flexibility: a diversified portfolio can be adjusted more easily as financial objectives and the economic environment evolve.

Effective diversification is not limited to holding several investments. It is based on three complementary pillars to reduce risk exposure.

Diversifying by asset classes 

The main asset classes do not evolve in the same way depending on economic cycles. This is what makes them complementary.

• Equities offer high growth potential over the long term, but their value can fluctuate significantly in the short term.
• Bonds provide greater stability and regular income, but with more limited returns.
• Real estate, accessible through dedicated funds, generates rental income and reacts differently from financial markets..
• Cash, finally, makes it possible to seize opportunities or deal with unforeseen events.

Combining these asset classes in the right proportions is the foundation of a truly diversified portfolio. To access them easily, investment funds allow you to invest in several asset classes at once, without selecting each security individually.

To get a concrete starting point, consult the BGL fund selection to diversify your portfolio.

 

Diversifying geographically

Economies of different countries do not all evolve at the same pace or at the same time. When one region slows down, another may continue to grow.
Spreading investments across different regions makes it possible to capture these varied dynamics and avoid relying on a single local economic environment.

Diversifying by sector of activity

Within financial markets, sectors do not all react in the same way to economic conditions. Some may progress when others slow down, while some remain more stable during periods of uncertainty.
Spreading investments across several sectors therefore makes it possible not to depend on a single one and to build a portfolio that is more balanced with market fluctuations.

Thematic or index funds make it possible to achieve this sectoral diversification with no need to analyse each company individually.