Of course you wouldn’t. Only a complete novice would do such a thing, or maybe a high-stakes gambler. Spreading your money across different investments to reduce the damage if one of them crashes is called portfolio diversification, and every investor does it to a greater or lesser degree. A properly diversified portfolio brings two massive benefits, reducing risk and making you richer. It's basic common sense, really, and there's an old, old saying that sums it up: never put all your eggs in one basket. Or rather, all your nest egg. The tricky part is getting the balance right.
Keep your shirt
Diversification is vital when investing in stocks and shares, because you don’t want to gamble your entire pot on the next Enron, Kodak or Lehmans. A properly diversified portfolio of direct equities should therefore include at least 15 or 20 companies, to spread the risk. Don't just buy any company that takes your fancy, though. They should operate in different sectors, such as energy, financials, technology, mining, media, insurance, industrials and so on, to give you exposure to different parts of the economy. If you owned banking stocks Barclays, Lloyds and Royal Bank of Scotland before the financial crisis, you didn’t really have any diversification at all. Of course the simplest way of doing this is to buy an investment fund giving you a balanced spread of equities.
Most expat investors instinctively lean towards their home stock market, but you need global diversification as well. Different countries and regions tend to perform at different times – emerging markets started the Millennium with a bang, while US stocks have flown over the past decade. You then need to balance these regions with the UK, Europe, Asia-Pacific and Japan, and possibly a sprinkling of frontier markets as well. You can further diversify by investing in one or two commercial property funds, and possibly commodities as well. Remember to review your portfolio regularly to avoid becoming overweight in one particular sector. Right now, many investors may have outsize exposure to the resurgent US, and should consider reallocating some profits elsewhere.