Browsing: Financial glossary

Investment trusts are companies that invest money in other companies, both listed and private, and/or other assets like bonds and property.

Horizontal diversification is when you hold different instances of the same asset class. In this form of portfolio diversification, you’re trying to reduce localised or industry sector specific risks. A broad index-based ETF is a good example of horizontal diversification.

Vertical diversification is when your investment portfolio is spread across different types of assets. Cash, government bonds, corporate bonds, property and shares can each be expected to behave slightly differently and so produce different returns, as circumstances change. For instance, government bonds may soar when stock markets crash, because frightened…

When deciding whether to buy a particular asset, we should also pay attention to the assets we already own. A collection of assets is called a portfolio. By buying and holding assets with different characteristics, we can try to create a portfolio that offers the greatest return for the risk…