Asset allocation - Asset Classes

As mentioned previously, the four main asset categories can be divided into the following classes

Cash - money invested in banks, building societies and other organisations to produce interest

Gilts - gilt-edged securities are Government loans, such as those issued by the British Government. 

Corporate Bonds - Corporate bonds are loans issued to companies.

UK Equities - UK shares have historically provided high returns over the medium to long term. However equities are quite volatile over short periods and a lack of certainty over future price movements makes them a riskier investment than some other asset classes.

US Equities - these produce a more diversified portfolio than UK based equities. Exposure to the world’s largest economy can offer the prospect of higher returns, but with a higher level of risk, as
these funds are subject to the movements in currency exchange rates. This can lead to above average short-term price fluctuations.

European Equities - investing in European equities provides further diversification within your portfolio although they are also affected by movements in currency exchange rates.

Far East Equities -  exposure to Far Eastern equities provides further diversification within your portfolio although they are also affected by movements in currency exchange rates.

Japanese Equities - investing in the Japanese economy provides further diversification within your portfolio although they are also affected by movements in currency exchange rates.

Specialist Funds - the funds in this sector can invest in areas not currently covered within the asset allocation model. The funds we select currently include such funds as BRIC funds i.e. Brazil, Russia, India & China, Natural Resources and Latin America depending on clients risk profile. This list maybe expanded to include other specialist sectors dependant on prevailing market conditions and performance. The specialist sector will provide further diversification although more volatility.

Property Funds - investing in commercial property such as offices, retail, leisure, and industrial developments, and also residential property provide a good diversification away from equities and are considered the foundation of many portfolios.

There is no guarantee regarding how any of these asset classes will perform in the future. You should retain some liquid funds in a deposit account, which may also be held within your portfolio.

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