It's the investment mantra. But if you were to invest only in one company on the Australian sharemarket and its profits took a nosedive or the management team walked away, your initial investment might be pounded. But if you invested in five stocks on the market, all in different industries, then if one were in the doldrums, your other investments might still hold their ground. If interest rates were to rise and the sharemarket went off the boil, your fixed interest and property investments might show some strength. Take the aftermath of the 1987 sharemarket crash when the property market boomed.
Case study An investment adviser looks at the personal wants and needs of three investors.
This heavy weighting towards shares may not sit comfortably with your overall strategy. As a result many advisers suggest you rebalance your portfolio by selling some of your shares and diverting those funds into property and fixed interest. Which assets you invest in and how much you invest in each comes down to your personality, your age, your goals and your life stage. It's what the experts call your risk tolerance. Everybody is different.