Understanding Diversification
Investor Guide
What is diversification?
Diversification means spreading your money across different investments to reduce risk. It is a very
important investment discipline and has become one of the world’s most used and most valuable
piece of investment advice – “don’t put all your eggs in one basket.”
The more you diversify your investments, the less likely you are to suffer from the poor performance
of one investment class. Unfortunately, a large number of investment portfolios appear poorlydiversified – and that can be expensive.
The pie chart below indicates asset allocations of a ‘typical’ Balanced Fund as at 31 March 2016.
The composition of this chart may change. Please note that asset allocation would vary depending on individual circumstances
and past asset allocation is not a reliable indicator of future asset allocation.
More than one kind of diversification
Professional investment managers normally produce better returns than individual investors, yet it is
equally important to diversify across managers as well as asset classes. Different managers have
different skills and perform well under different conditions. One efficient and effective way of
diversifying your investment portfolio is by using a multi-manager investing approach.
Multi-manager investing is based on the idea that no single investment manager is likely to perform
well in all market conditions, so using a number of different but complementary managers across a
range of asset classes reduces the risk of one investment manager performing poorly.
TAL’s multi-manager, diversified investment options are managed by Russell Investment
Management Ltd (Russell), one of the world’s leading investment managers. Russell pioneered the
multi-manager investing approach in Australia. Russell’s disciplined approach uses three levels of
diversification so investors can benefit regardless of which manager or asset class is in favour with
the market.
No two diversification strategies are the same
Diversifying across shares, cash, bonds and property potentially reduces your risk. It also plays a
crucial role in tailoring your investment portfolio to your needs. Just as no two investors are the same,
no two diversification strategies need to be the same. This asset allocation process is one of the
crucial parts of investment strategy.
Talk to your financial adviser about the best diversification strategy for you.
Russell Investments – Three levels of diversification
TAL Life Limited
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This document is issued by TAL Superannuation Limited, ABN 69 003 059 407 as Trustee for the TAL Superannuation and Insurance Fund, ABN
20 891 605 180.
www.tal.com.au
The information contained in this publication is of a general nature only and was prepared without taking into account your objectives, financial
situation or particular needs. It is not intended to be tax or legal advice and should not be relied upon as such. Before acting on any of this
information, we strongly recommend you seek independent financial and taxation advice. While TAL endeavours to ensure the accuracy of the
information provided, TAL expressly disclaims all liability and responsibility to any person who relies, or partially relies, upon anything done or
omitted to be done by this publication. TAL does not accept any responsibility for the accuracy, completeness or currency of the material included
in this publication, and will not be liable for any loss or damage arising out of any use of, or reliance on, this publication. This information is current
as at June 2015. It may have changed since that date. Issue Date: June 2015