Diversification: the secret to success in relationships and investments

Consistency is key in love and money, but no one person in a relationship can make the relationship thrive ‒ and the same goes for investing. In a relationship, balance means not leaving it to one person always to cook dinner or organise date night. Both partners supporting each other, and the relationship, is what leads to lasting love. And in the same way, variety, or diversification, is the secret to lasting happiness in your investment portfolio.

Just like in love, investing is all about compatibility. Every investor has a “type”: some crave excitement, others seek stability, and a few want a partner who is both dependable and adventurous. The trick is knowing yourself ‒ your goals, your priorities, and your risk appetite ‒ so you can fall head over heels for the investments that truly suit you.

By spreading your love across different asset classes, thereby ensuring diversification, you protect yourself from heartbreak when one asset class experiences a period of volatility.

Equities: the whirlwind romance

Investing in equities can be like a whirlwind, passionate romance. They tend to be more volatile than other asset classes – one day they’re up, the next day they’re down – and the only way to benefit from this investment class is by sticking with it for the long term. The market moves in cycles, and you’d need to ride out these cycles to see the growth over time. Yes, it can be turbulent, but there is a potential for rewards if you stay committed.

 Bonds: Going Steady

Bonds, on the other hand, are more stable. They offer steady growth, with regular coupon payments that you can either cash out or reinvest. The consistency of a steady income makes bonds a good companion to their more volatile partner, equities.

 In other words, bonds can seem boring… but – as in a relationship – boring and dependable can be good. The excitement of equities and the stability of bonds help to create a balanced portfolio.

Listed Property: A Bit of Both Worlds

In a relationship, moving in or buying a home together is a sign that things are serious. Listed property does the same for your investment portfolio, giving you access to real-world brick and mortar properties, without you owning a physical asset like a house or a flat. A listed property company or fund buys, sells, and manages rentals of shopping malls, office blocks, and residential housing. Given the fact that this is a listed instrument, it behaves like an equity, but because of the consistency of the income generation through rental income, it also acts like a bond.

 Global Funds: An Overseas Adventure

 Offshore exposure can do for your investments what an overseas holiday does for your relationship. Global equities, bonds, or property let you be a bit more adventurous. There is an added element of risk in currency, geopolitical, and economic risks, but this gives you access to investments and industries you can’t get if you stay at home, only investing in South African funds.

 Diversity… With Consistency

 Whether you’re drawn to the hometown sweetheart of local equities or the worldly charm of an offshore investment, there’s a match waiting for every investor. But true fulfilment comes from balance ‒ finding joy in variety, resilience in differences, and strength in a partner who complements you, the same way a diversified portfolio could fulfil your future wealth needs.

* Jacobs is the senior portfolio manager at Satrix.

PERSONAL FINANCE