Spotlight: Why a Diverse Investment Portfolio Matters
Making smart choices about risk and reward

When it comes to investing, one golden rule stands out: don’t put all your eggs in one basket. Spreading your money across different types of investments—like shares, bonds, property, and even across tax wrappers—can help you manage risk more effectively and keep your long-term goals on track. It's not about chasing the biggest return, but making sure you're not too exposed if one area takes a knock.

We often say that the right mix of assets isn’t just about performance, it’s about peace of mind. If one part of your portfolio dips, another may hold steady—or even grow—keeping your overall plan moving forward.

What does the typical UK investor look like?

According to HMRC, UK adults had £725.9bn in ISAs at the end of 2022/23—much of that in stocks and shares. But for many, investments still sit in a small number of pots, and that can be risky. At the same time, household disposable income is expected to grow by just 0.5% a year over the next five years. In that kind of climate, a disciplined, well-diversified portfolio—built around your tax position—can make a real difference.

Start with your personal risk profile

Before picking where to put your money, it’s essential to understand how much risk you’re comfortable with and what you can afford to lose. I always suggest starting with a written risk profile.

That means looking at:

• How long you're investing for (a house deposit in 5 years vs. retirement in 20)
• What cashflow you’ll need and when
• How much short-term volatility you can handle
• Stress-testing: What happens if markets drop 20%?

This gives us a reliable foundation to build from—and review later.

The building blocks of a strong portfolio

In most cases, a well-diversified investment mix will include:

• Cash for flexibility and emergencies
• Bonds (UK gilts or corporate) to balance equity risk
• Equities (UK and international) for long-term growth
• Property—via REITs or a rental—for steady returns
• Alternatives like infrastructure funds or commodities for added resilience

How much of each will depend on your personal goals, risk profile and timeframe.

Wrappers matter—don’t lose out on tax efficiency

You could have the best mix of assets, but if they’re in the wrong place, you could still be leaking value. That’s where ISAs and pensions come in. With shrinking allowances—£500 for dividends, £3,000 CGT exemption—it’s more important than ever to be strategic.

For 2025/26:

• The ISA limit remains £20,000
• Pensions offer up to £60,000 in annual allowance (tapered for higher earners), and
• The lifetime allowance has gone, but new lump-sum limits apply

Putting the right assets in the right wrapper often gives a better return than trying to pick the perfect fund.

Diversify across geography and sectors too

Many UK investors still hold a home bias, but UK-listed stocks only make up about 4% of the global market. By adding funds that track US, European, Japanese and emerging markets, you reduce the risk of being too tied to one economy.

The same goes for sectors—healthcare, tech, infrastructure—they all react differently to economic changes. Spreading exposure here builds in more protection.

Think defensively

Defensive holdings like short-duration bonds or a small slice of gold can help cushion against market shocks. They won’t make headlines, but they’ll help you stay on track when the going gets tough. Just make sure the cost structure is clear if you’re looking at absolute-return strategies or alternatives.

Rebalance regularly

Markets move. So even the best-planned portfolio can drift off course. I usually suggest checking your allocations at least once a year, or more if a big swing happens. Rebalancing brings things back in line, trims overperformers, and helps avoid emotional investing.

Don’t forget about tax freezes

The personal allowance (£12,570) and basic-rate band (£37,700) remain frozen for 2025/26. With inflation and rising earnings, that can quietly push you into higher tax bands over time.

That’s why we check in on things like:

• Salary sacrifice or pension top-ups to manage taxable income
• Making full use of ISA and pension limits before 5 April
• Reviewing dividend and savings allowances
• Making tax-smart shifts like “bed and ISA” transfers

What we bring to the table

When I work with clients, I’m not just looking at your investments in isolation. I’m combining your real-time income, allowances, and business position with investment planning that fits you—not a one-size-fits-all template.

That might include:

• Sharing tax data securely so we have the full picture
• Aligning investments with your business or personal goals
• Sending plain-language performance updates
• Keeping you on track before tax deadlines hit

The bottom line

Diversification isn’t a one-off job—it’s a living, breathing strategy. Your investments will move with the market, but your goals won’t change overnight. Regular, thoughtful reviews help keep everything aligned.

Working with an accountant who understands your whole financial life—from tax to cashflow to retirement—gives you a real advantage. We make sure you’re using every available allowance and wrapper to protect your wealth and meet your targets with confidence.

Got questions about your current set-up, or just want a second opinion? Get in touch and let’s talk through it.