Assess how well diversified your investment portfolio really is. Allocate percentages across asset classes, geographies and sectors to see your diversification score, concentration risks and specific suggestions for improvement.
Allocate your portfolio across each category. Totals will auto-calculate your diversification score.
Diversification is the only free lunch in investing. By spreading risk across assets that do not move in perfect lockstep, you reduce portfolio volatility without proportionally reducing expected return. But diversification is not just about owning lots of different things — it requires spreading across genuinely different risk factors: asset classes, geographies and sectors.
Holding UK equities, global equities, bonds, property and cash provides exposure to assets with different risk/return profiles and low correlation during normal markets. During stress events, correlations tend to increase — which is why truly diversified portfolios include uncorrelated assets like government bonds and cash alongside equities.
UK equities represent under 4% of global market capitalisation. A UK-only equity portfolio misses 96% of the world's investment opportunities. The US market (around 60% of global cap) has significantly outperformed UK equities over 10 and 20 years. A global index fund provides instant geographic diversification at minimal cost.
The FTSE 100 is heavily weighted toward financials, energy and mining — sectors that underperform during specific economic conditions. Tech exposure in the UK is minimal. A global equity index automatically provides sector balance including the technology sector that has driven returns over the past decade.
Investing regularly (monthly SIP) rather than in a single lump sum diversifies across market entry points over time. This pound-cost averaging effect means you automatically buy more when prices are low and less when prices are high, reducing the impact of market timing on your long-term return.
For equity-only diversification, research suggests approximately 15-30 stocks across different sectors eliminates most unsystematic (company-specific) risk. However, a single low-cost global index ETF (such as iShares Core MSCI World or Vanguard FTSE All-World) holds 1,500-3,500 companies across 23-50 countries — providing more diversification than most private investors could construct themselves, at a fraction of the cost.
Only partially. The FTSE 100 is heavily concentrated in financials (banks, insurers), energy (BP, Shell) and mining companies — sectors that make up over 40% of the index. It has minimal technology exposure compared to global indices. Investing solely in the FTSE 100 concentrates you in specific sectors and one geography. Adding a global ex-UK fund significantly improves diversification.
The HHI measures concentration by summing the squares of each holding's percentage weight. A fully concentrated single-asset portfolio scores 10,000. An equal-weight 10-asset portfolio scores 1,000. Our diversification score converts HHI across asset classes, geographies and sectors into a 0-100 scale. Scores above 65 indicate acceptable diversification; below 50 suggests significant concentration risk.