Quote Originally Posted by TheHeathens View Post
I'm not implying that diversification is good - it is good (and the FSA agrees - they could uphold a complaint for misselling against advisers if there was no diversification). The whole point of diversification is to lessen the impact on your portfolio if things go belly up - a case of not putting all of your eggs in one basket.

The best example of this is commercial property - between 2000 and 2006 the returns exceeded average UK share returns. I know of at least 3 financial advisers who used to write investment bonds solely investing in property funds, which was fine when the returns were good.

However, about a year ago, people started withdrawing money from the funds because they suspected the end of the bubble - subsequently proven to be correct. Because of the illiquid nature of property (if people withdraw too much money, they have to sell a property), companies started imposing notice periods of 6 - 12 months (i.e you couldn't get your money out for that period) and property prices crashed. Those people whose advisers advised that they invested solely in property lost on average 24% (the sector average) of their investment in 2007 and a further 12% already this year. There's nothing they can do about it as they can't withdraw the money (or switch funds) due to the notice period.

Property is a special case (you don't have notice periods on most other investments) but it does highlight the need to spread your investments across different areas.



You are the king of spin, aren't you! What I actually said was we're probably heading for recession (we're not there yet) but it's not 'quite at depression stage yet' meaning that the way you've been going on, one would assume we were in a depression! I can't see us getting to that stage.
Diversification is not necessarily good, which you seem to insist on. And I'm not interested in the opinions of an interfering and meddling regulatory body,like the FSA. If a person invests in 4 companies and they all fail then his diversification wasn't good. You seem to be implying that if you spread your money around enough, then that in itself will secure success. Your position is deterministic.

We are in a recession already and it's obvious to most people. We don't need to wait for government figures to know that. The question is will we reach a depression in the next few years. The answer to that depends on what our government does from now on. It isn't looking too promising.