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Investors place too many eggs in two baskets

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Many wealthy investors are focusing too narrowly on investing in property and the stock market and may benefit from diversifying their investments.

According to a survey of 1,399 adults, each with over £250,000 in savings and investments, carried out by Lloyds TSB Private Banking, only 19% hold corporate bonds, 16% government bonds, 7% precious metals and 6% foreign currency.

These figures have remained steady since September 2011, when 18% held corporate bonds, 17% held government bonds, 6% held precious metals and 6% held foreign currency.

Excluding their main residence, 41% of the wealthy investors surveyed had property investments, with average holdings of £346,842 – an increase of almost 14% on September 2011 when the figure was £304,549.

Equities were also heavily favoured, with investors holding an average of £171,354 in stocks and shares, an increase of 1% on September 2011’s figure of £169,742.

Despite this heavy reliance on property and equities, only 17% of investors surveyed admit their portfolios are not well-diversified. Among those who said their investments are not well-diversified, the two main reasons given are they’re unsure about where else to invest (37%) and that they think one or two asset classes will significantly outperform others (21%).

Ashish Misra, head of investments at Lloyds TSB Private Banking, said:

“Many investors are seeking potential returns by investing in equities, and while property is traditionally a more conservative play, it appears many wealthy Brits have joined overseas investors in increasing their prime property allocation, particularly in London. However, it is important that people do not overexpose themselves to any one asset class in a way that may leave them vulnerable to potential market shocks.

“Effective diversification and a long-term focus are crucial to maintaining an appropriately balanced portfolio, and investors should concentrate their efforts on asset allocation rather than focusing purely on picking individual stocks.”