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Portfolio Diversification In An Fluctuating Market - Citi UK

6 September 2017HighlightsEconomicsPolitics
Portfolio Diversification - Citi UK

Diversifying your portfolio in an uncertain climate: Is it possible?

  • In a time of both financial and political unreliability, diversifying your portfolio can be daunting
  • Brexit, upcoming German Federal elections plus ongoing US tension are just some factors causing uncertainty in the market
  • Risk-limiting investments are increasingly appealing, but there's still opportunity to develop your portfolio

Today's fluctuating market

With ever-changing financial markets often rocked by unpredictable political outcomes, uncertainty can affect your decisions when it comes to investing. Ongoing uncertainty over Brexit deals and the UK's future relationships with Europe in all industries (not just financial) may be key factors causing doubt over investment options.

The upcoming German Federal elections, which will see current Chancellor Angela Merkel vie for leadership for another four-year term, could affect the status of the European Union and therefore the UK's Brexit agreements. Citi analysts believe that Europe's relationship with the US could be at stake too (Merkel's opposition, should they triumph, are less likely to appease Trump), which will affect financial deals and foreign exchange.

It's not just Europe's relationship with the US that influences the market, of course. Continuing strained relations between the US and North Korea have already resulted in fluctuating American market, with the USD dropping and then rebounding as a result of Trump's most recent nuclear threats.

As a result of such political turmoil, investing in new areas can be off-putting regardless of any personal passion or interest. Becoming involved with new technology, for instance, despite its ongoing growth, may seem more risky. The same applies to exposing yourself to the stock market for the first time – insecurity can make for tentative decisions.

What options are there?

There are multiple investment options made for a tumultuous market, with one being a Structured Note. Structured Notes see higher risk, unpredictable assets bundled together with more reliable, lower risk ones – tackling instability more successfully than if you invested in a single asset alone. These tend to be split between a bond, which makes up the majority of the investment, and a derivative, formed from what's left. By limiting the risk, you're able to diversify your portfolio with something that you're truly interested in, whether it is a new business endeavour or an old passion.

Continuously aware of market variation, political events and future technologies, Citi works with the leading providers of Structured Notes, so benefits from the experience of the some of the world's top financial companies. Because of an ever-moving financial climate, new Structured Notes options are released every month, harnessing tactical or strategic market opportunities in real time.

Do stay aware of risks, however

As with any investment, always be aware of risks. In terms of Structured Notes, both capital and non-capital protected Structured Notes are still subject to risk. You'll need to hold the product until its maturity date, and if your issuer is unable to pay the initial investment back, you could still lose your money.

With Brexit contracts still in discussion, more European elections on the horizon (Italy's election takes place next spring), and continued US tensions, the market looks unlikely to settle soon. As always, for any questions or queries, your Relationship Manager is on hand to help.

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