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Most investors lack diversification in portfolios

Most investors lack diversification in portfolios

More than two-thirds of investors in the UK who have begun seeking financial advice from the deVere Group since the beginning of 2013 had investment portfolios that "lacked any truly beneficial diversification", it has been revealed.

Nigel Green, founder and chief executive of the independent financial advisory firm deVere Group, said: "It's extremely concerning that our advisers have reported so few investors when they first came to us had a well-diversified portfolio.

"68% of all new clients who have sought advice from us in the first four months of this year lacked any truly beneficial diversification in their portfolios which, of course, potentially put their hard-earned life-savings at greater risk [than if it were more diversified] in these times of ongoing volatility."

Green said "the most worrying feature" of new clients' portfolios was their over-exposure to bank deposits.

"Lessons need to be learned from what has happened since the start of the global crash and more recently in Cyprus," he said.

"Perspectives need to be broadened as bank deposits are not as safe as they once were, especially as a growing number of countries - including Switzerland once arguably the world's ultimate safe banking haven - have changed or are in the process of changing their laws to enable depositors' funds, over a certain level, to be raided should a bank and/or wider system face collapse.

"Certainly, in today's world, leaving more than around £80,000, or the equivalent of that, in an account in any one institution, is not something we typically would advise.

"In addition, with the current low interest rate environment and the creeping inflation, reducing holdings of cash in banks should be an investment priority for many people, as stashing cash in a bank account is, in all probability, not likely to accumulate an adequate nest egg in order to enjoy a comparable lifestyle in retirement.

"In today's fast-changing and often turbulent world, investment portfolio diversification has never been more important, and old assumptions about bank deposits should be up-dated.

"Are bank deposits safe? Most of the time, yes; but it is vital that nowadays you are not over exposed to them because when they're not safe, you could stand to lose a great deal fast.  Now more than ever, investors need to strategically spread risk."

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George Bailey