Diversification
Sector funds - diversifying within asset classes
Sector funds generally invest in one main asset class. The benefits of diversification within an asset class can be achieved by investing across a range of different regions and industries.
Examples of diversification within an asset class include investing in commercial property, hotels and retail shopping centres within a property securities fund; or investing in shares from the manufacturing, transport and telecommunications sectors in the BT New Zealand Plus Share Fund.
Why hold just one or two shares when you could hold ninety?
Many people
believe that buying shares directly in one or two blue-chip companies
will give them all the benefits associated with share investments.
If you are buying shares directly however, you need to determine the best time to sell. Or to buy more shares. Or to identify another company that represents greater potential for growth.
Picking the right shares takes careful research, ongoing monitoring and an understanding of how to evaluate the long-term prospects of individual companies.
Then there's the fact that holding just one or two shares does not give you very much diversification - you have all your eggs in one or two baskets!
Managed investments help overcome these problems. You are using the combined resources and research capacity of the fund manager's team of investment professionals. In a sector specific share fund you gain exposure to many different companies no matter how small your initial investment may be. By using the BT Regular Savings Plan you can achieve this diversification from as little as $100 a month. Holding a large number of companies spread throughout different market sectors (ie different industries) can reduce the risk of low returns.
