by Connor Coombe-Withlock
Investing today is harder than ever, with endless advice and conflicting opinions making it tough to know what’s right. Our latest whitepaper cuts through the noise, revealing how UK investors are diversifying their portfolios across multiple asset classes.
The whitepaper covers:
Download the full report to gain valuable insights and see where you fit in the bigger financial picture.
Investing is hard. What makes it even harder, in my opinion, is our information age. The internet is filled to the brim with experts, commentators, mavericks, gurus, and more. The sheer amount of advice out there – or bluster masquerading as advice – has reached ridiculous levels.
It’s hard to know where to start, or understand if we’re even on the right path. For every flashy piece of analysis recommending one asset or opportunity, you’ll be able to find another deeming it a waste of time.
Thankfully, there are a few investment principles which tend to stand the test of time. Chief among them is one key belief that’s shared by most, if not all in the investment fields: diversity is key[1].
I wanted to understand how diversity is being factored in by investors. I feel it’s an especially important factor in the current market, where entire asset classes can be blown off course (even if only temporarily) by unexpected trade tariffs[2], renewed European vigour[3], and nervous central bankers[4].
This whitepaper explores how investors in the UK are thinking about diversification with their portfolios. Not just their property holdings either, but their entire investment portfolios.
We have surveyed a nationally representative sample of investors on their holdings. The results are comprehensive, covering multiple asset classes, and investor types. We have segmented our results by portfolio size, gender, age, location, experience, and more.
This analysis is not, and should not be taken as investment advice, however. In fact, if there’s one take away from this whitepaper, it’s that incorporating diversification into a portfolio is an individual concern.
There is no one right answer to the question of how many stocks should one own compared to bonds, or if BTL assets are preferential to gold. To understand what’s right for you, you should seek guidance from a qualified financial advisor.
Instead, I hope to illuminate how property investments may be sitting alongside other asset classes in our broad financial landscape. I will break down the results, while providing some commentary which should, hopefully, prove useful for those who want to better understand how they fit into the wider picture.
For any brokers reading, perhaps by the end of this they’ll feel assured in discussing what’s going on in the investment world with their clients, instead of focusing on property and nothing else. For investors themselves, maybe it’ll get them thinking about how they can explore their options, or discuss ideas with their advisors.
Before we continue though, I had better clear up exactly what I’m talking about when it comes to diversification. It may seem deceptively simple.
What can happen is that people conflate diversification with asset allocation[5]. The two can intermix[6], but close attention needs to be given to both. Without getting too bogged down in technicalities, asset allocation is broadly how we decide how many of our “eggs” are going to be put into how many different “baskets”, or asset classes.
Whereas diversification is how we spread out investments within those asset classes. Equities are an asset class. The shares of Apple, GSK, or McDonalds are examples of holdings within that asset class.
This is where things can get tricky though. Say, for example, an investor holds investments in each of the main asset classes. Seems diverse enough. But, if they only hold a single investment in each, are they truly getting the benefit of diversification?
On the flip side, another investor may hold 100s of shares spread across numerous sectors, but no other assets. They may be effectively diversified within the equity market, but if an economic problem sends all (or most) equities plummeting (a la 2008), not holding any other asset class to cushion the fall may prove problematic.
Also, there are several circumstantial factors that can affect how we think about diversification and/or asset allocation. A 25-year-old’s portfolio will likely look very different to that of a retiree.
In a very basic and simple example, a financial advisor may guide a young person to put most of their spare wealth into shares. Whereas someone approaching retirement will likely be advised to move some of their money into bonds.
The priorities of the underlying investor also need to be considered. Are they after capital gains, income, or a combination of both? The answers will sway their holdings. There are strategies and longstanding precedents behind this too. There are “60:40[7]” portfolios, “long-short strategies[8]”, and even “hodling[9]”.
Evidently, this is such a broad area that it would be near-impossible to cover everything in a single report. For those looking for specifics, there are countless resources online that go in-depth on investment strategies and the like.
In this whitepaper, what we’ll do instead is explore the idea of diversity from an asset allocation perspective. We will take our results, look at how investors are allocated, and explore what’s going on within those asset classes. What we will not do is go into detail on specific holdings within those classes.
Again, to reiterate, this isn’t to be used as a bible on all things investing. In reality, there is no such thing as a one-size-fits-all strategy. What’s best for any investor will depend on their circumstances, which will need to be discussed with a qualified advisor.
With that said, let’s explore what our survey revealed.
Our survey was conducted by Opinium, and was split across four key questions:
Kindly, Opinium summarised the results for Market Financial Solutions, highlighting the most important insights: “Almost a third (29%) of UK investors surveyed hold equities such as shares, ETFs and investment trusts. Meanwhile, 26% hold cash and cash equivalents, 8% property, 8% fixed income, 5% commodities, and 4% digital assets.
Nearly two fifths of UK investors surveyed plan to invest or increase their investment in cash and cash equivalents (39%), or equities such as shares, ETFs, and investment trusts (38%). Fixed income (19%), digital assets, and commodities (each 16%) are other popular assets for investors to start or increase their current investment in.
Thinking about 2025, investors believe that interest rates (36%), market volatility (34%), and inflation (28%) will have the biggest impact on their investment decisions and strategies. Other top challenges investors will navigate include a second Trump presidency (23%), taxes (22%), US trade tariffs (20%), and political instability (19%).
Continuing to think about 2025, three fifths (61%) of investors surveyed are concerned that high inflation could return and negatively impact their investments for the next 12 months – highest among investors with £100,00 – £249,000 investable assets (62%).
A similar proportion of UK investors surveyed believe that tax efficiency will play a bigger role in their investment in the future (59%), highest among investors with £250,000+ assets (68%).
Over half of investors (53%) surveyed agree that property offers more stability as an investment compared to other asset classes.
Two fifths (41%) of investors surveyed believe that the turbulence of the last 5 years has reduced their confidence in traditional investment assets such as bonds, stocks, and shares. Perhaps as a result, this is why 46% of investors are diversifying their investment portfolio as their top priority.
Lastly, over half (53%) of investors surveyed have taken, or plan to take a more proactive approach to managing their investments in 2025. Meanwhile, two fifths (40%) of investors have reduced or plan to reduce their exposure to risk within the investment portfolio in 2025.”
Now, let’s explore each of the asset classes in detail. Starting with our bread and butter, property.
Disclaimer
Market Financial Solutions are a bridging loan and buy-to-let mortgage provider, not financial advisors. Therefore, Investors are encouraged to seek professional advice. The information in this content is correct at time of writing.
[1] https://www.investopedia.com/investing/importance-diversification/#:~:text=By%20spreading%20your%20investments%20across,increasing%20your%20risk%2Dadjusted%20returns.
[2] https://www.bbc.co.uk/news/articles/ckg1jxdpq0qo
[3] https://news.sky.com/story/what-is-a-coalition-of-the-willing-and-which-countries-could-send-peacekeeping-troops-to-ukraine-13320663
[4] https://www.thisismoney.co.uk/money/markets/article-14465931/Trumps-tariffs-rock-UK-global-economies-warns-Bank-England-governor-Andrew-Bailey.html
[5] https://www.reuters.com/plus/asset-allocation
[6] https://www.finra.org/investors/investing/investing-basics/asset-allocation-diversification
[7] https://www.morganstanley.com/ideas/60-40-investment-portfolio-future#:~:text=The%2060%2F40%20strategy%20evolved,based%20on%20their%20individual%20circumstances.
[8] https://www.investopedia.com/terms/l/long-shortequity.asp
[9] https://www.investopedia.com/terms/h/hodl.asp