What is a balanced portfolio?


There are many ways to plan and build an investment portfolio. You can aim to preserve capital, or maximise income.
We look at what a balanced portfolio is, and why it may be appropriate in the current climate.

Do you have a balanced portfolio?

A balanced investment strategy is a method of planning the content of your portfolio to balance risk and return.

To balance risk and return, it uses the principles of asset allocation to manage the risk of the overall portfolio whilst attempting to maximise the potential returns.

In other words, it provides a spread of holdings, each of which will have a different risk exposure depending on your attitude to investment risk and the objective of the portfolio i.e. growth or income.

With an equally balanced strategy money will be invested dependent on the individual portfolio and there may be a need to rebalance the portfolio to remain in line with your investment objective.

Is there a downside to a balanced portfolio?

Although the balanced investment strategy aims to balance risk and return it does carry more risk than strategies aiming at preserving capital or delivering a steady income.

It tends to be suitable for investors with a longer time horizon. A balanced portfolio is normally suitable for investors who want their portfolio managed and who do not have high risk investment strategy.

And what are the advantages?

A properly balanced portfolio could allow you to take advantage of market upswings while not losing everything in a downturn.

While no investment is completely safe, a balanced approach with the widest possible spread of asset allocation could provide the best strategy for dealing with a volatile and unpredictable economy.

Experts have different views as to where we are currently headed. At home, Brexit uncertainties are enough to cloud any crystal ball. In the global economy, the effects of rising interest rates, trade wars and the worrying rumbling coming from China all make any kind of financial forecasting impossible.

It is this lack of financial certainty that could make a balanced approach to investing so very appropriate for the current climate. If Brexit goes off smoothly, and the global economy gets back on the rails, the speculative side of the balance could produce exciting capital growth.

How can you set up a balanced portfolio?

If the advantages of a balanced approach meet your objectives, it could be time to look at your portfolio.

For help with setting up the portfolio you want, call us at Continuum.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.

The value of investments can fall as well as rise and you may get back less than you invested.

Book a free initial consultation

Book an initial consultation with one of our independent financial advisers or call us on 0345 643 0770 if you would like to discuss further.

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