A two-minute guide to diversification and the benefits of it

A two-minute guide to diversification and the benefits of it

Most people are put off investing money in financial markets for fear of losing money. Who can blame them? The press is full of horror stories of people losing their life savings because of market crashes or failing companies.

1. Planet Money

Length: 20 mins

Audience type: Everyone

Why not start with the best. From the makers of This American Life comes one of the best, most easy to listen to finance podcasts.

Essentially it's a storytelling podcast with finance as the backdrop. A variety of the world's best journalists combine with experts in their field to tear into the world of finance.

Go back to the start, when they launched during the financial crisis. It is fascinating hearing it unfold.

If you haven't got time, listen to the episodes where they buy a barrel of oil and try to make money from it?

Or when they program a robot to trade in the stockmarket on the back of Trump's tweets?

The Planet Money team are the doyens of the financial and economic podcasting world. They almost invented the genre.

2. Freakonomics

Length: 40 mins

Audience type: Everyone

Stephen Dubner, a journalist, was so wowed by esteemed economist Steven Levitt, they decided to team up and write a book on economics.

But it wasn't some impenetrable doorstopper. No, it used behavioural economics (emotional economics, really) to explain how people choose baby names, why teachers cheat and why crime rates in American cities mysteriously plunged in the Nineties.

The Freakonomics phenomenon has continued and today Freakonomics Radio is essentially for those who want to understand money decision-making.

They take the data, dissect it and tell compelling human stories.

One of our favourite shows was How to Save $1 Billion Without Even Trying from 2014.

There's eight years of archive. Enjoy!

3. Money Box

Length: 30 mins

Audience type: Everyone

The first personal finance radio programme and still one of only a few.

Paul Lewis (@paullewismoney) has been a financial journalist since 1987 and has won dozens of awards.

He's joined by Louise Cooper and Adam Shaw (@adamshawbiz) on this hugely popular weekly BBC Radio 4 show.

It covers the latest news from the world of personal finance and tips for those trying to make the most of their money. That's us, yes please!

It is broadcast live on a Saturday morning, but you can catch up via the podcast.

There's plenty of factual money news and chat archived on the BBC Radio 4 site if it's a certain topic you're looking for.

There's a section dedicated to pensions new alone here.

4. Wake up to Money

Length: 40 mins

Audience type: Everyone

Journalist plus investment professional equals a great run-down for the day ahead.

Usually hosted by Adam Parsons, a TV and radio presenter, and ably assisted by Louise Cooper, a financial expert who has worked for Goldman Sachs.

It’s a podcast that looks at anything from your savings to investments to global news.

Check out interviews with the chief executives of some of the biggest brands in the UK – fascinating.

It broadcasts live at 5am each weekday morning. But if that’s too early for you the podcast is available to download by 7am.

5. The Economist Radio

Length: around 40 mins

Audience type: Committed investor

A statelier affair from the Economist team who dive into news, politics, business and finance and bring you the stories behind them.

The Economist was started in 1843 "to throw white light on the subjects within its range", and the podcast - like the publication - doesn't shy away from big questions.

It's not all about money. "The Economist asks" has a crack at answering questions such as; "What is the greatest threat to democracy?", "Has liberalism failed?" and "How has Donald Trump impacted America's cities?".

At MoneyLens, we love the "Money talks" podcast series too (of course!).

For an idea of how they tackle this sometimes dull topic, have a listen to this look back at 2017 from host Simon Long - featuring headaches at Uber, butter shortages in France and behavioural economics.

For the committed investor, "The week ahead" is a pretty handy and entertaining way to stay on the front foot.

6. Money for the Rest of Us

Length: 30 mins

Audience type: Hardcore investor

Money for the Rest of Us is from David Stein, a former portfolio manager.

If you haven't heard of him, he has managed billions of dollars worth of investments, and now he just wants to help people have enough money to retire and avoid the financial scare stories.

In his words: "I'm David Stein. I can teach you about money, how it works, how to invest it and how to live without worrying about it".  Helpful guy.

If you want money, investing, the economy, retirement, and wealth explained in a slightly philosophical way, this is for you. If you want "get rich quick" promises, think again.

7. Invest Like the Best

Length: Variable

Audience type: Hardcore investor

Patrick O’Shaughnessy is the CEO of O’Shaughnessy Asset Management.

He speaks with the most interesting people he can find, whose stories will help you better invest your time and your money.

People who make him want to work harder, learn more and do more for others.

Some of the conversations aren’t even on investing, but on principles for living. But it’s fair to say, broadly speaking this is one for the hardcore investor.

8. Up First

Length: Around 15 mins

Audience type: Everyone

Years of experience yet minutes to get their point of view across. These guys are the heart of what’s going on in Washington and around the world.

Hosted by Rachel Martin, David Greene and Steve Inskeep, with years of experience. They cover global news in 15 mins. What more do you want?

9. The Indicator

Length: 7 mins

Audience type: Everyone

Another podcast from Planet Money - the first podcast on our list. Stacey Vanek Smith and Cardiff Garcia host this Planet Money spin-off where the team take a number from the day’s news.

It could be the latest job figure, the amount in your savings account, a debt figure or something more obscure like Superbowl ticket prices.

They are “indicators” that tell us something about the world.

This is all you need to know in less than 10 minutes. This lot are making sense of newsy numbers for us with impressive efficiency!

10. More or Less: Behind the Stats

Length: Variable

Audience type: Everyone

Tim Harford is an economist and journalist from Oxford. He has produced a series of books which began with the Undercover Economist.

In the spirit of Freakonomics, he uses economics to explain how the world works.

He also writes an Undercover Economist for the FT. But the podcast is spawned from his BBC radio show, More or Less: Behind the Stats.

It tries to make sense of the statistics we all face every day, and he holds to account those spewing out the stats. One episode not to miss: Pensioners aren’t poor anymore (from 2016).

11. FT Money Show

Length: Around 30 mins

Audience type: Committed investor

Feel you don’t fit the FT reader stereotype? Forget about stereotypes. The FT Money Show brings you engaging and insightful coverage of the week's major personal finance issues. Want to know the secrets to early retirement or just how best to manage your money? Most of us do.

Claer Barrett and her team of FT journos dissect the news with the help of leading experts and discuss how the latest events will affect you and your pocket.

12. This is Money

Length: 50 mins

Audience type: Casual investor

A complete guide to personal finance and investing with news, predictions, advice, guides and opinion from expert presenters and guests.

Simon Lambert, the Editor of MailOnline’s Thisismoney and his team chat to host broadcaster Georgie Frost about the biggest stories of the week each Friday.

Wondering what 2018 will mean for your finances? Give this one a listen.

Predictions – as they admit – are a mug’s game, but they have taken a look at what could happen in 2018 in the world of money.

Simon Lambert, Sarah Davidson and Georgie Frost gazed into their crystal balls to talk about savings rates, property prices and the prospects for the UK economy.

13. Five ThirtyEight Politics

Length: 50 mins

Audience type: Committed investor

World renowned pollster Nate Silver and the FiveThirtyEight team cover the latest in politics, tracking the issues and “game-changers” every week.

Silver is an American statistician and writer who analyses baseball and elections. But here’s why you need to listen.

America, at the moment, still rules. They’re the biggest economy in the world. Their president is leader of the free world. When America catches a cold the world sneezes.

The FiveThityEight team are a feisty bunch. They are in regular conflict. Polling and data are contentious issues.

These guys look at what the data is telling them. They then debunk the data with numbers guys on one side and journalists on the other. Between them they argue and try figure out what the world around us is telling us.

14. It's Your Money

Length: 30 mins

Audience type: Everyone

Don’t write this one off just because it’s done by the fuddy-duddy Telegraph. The show, which fired up in 2017, is aimed at everyone. So it covers everything: it has warnings on the right and wrong mortgages, uncovers scams and loads of other consumer rights stuff.

It’s all done in small chunks – and there’s always a bit on investing. It’s hosted by the Telegraph’s Investment Editor Laura Suter in a light and breezy way.

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Bad news sells better than good news (we all have a slightly macabre interest in the misfortune of others).

People can lose money from investing. Of course, if you don’t want to take a risk there’s always the trusty savings account. They provide a return, albeit a meagre one because interest rates are low, and your money will be safe. The Financial Services Compensation Scheme (FSCS) protects up to £85,000 of money in banks, building societies and credit unions.

However, in the current climate inflation will eat away at the value of your savings. Investing, which does come with risk, offers the potential of higher returns.

The benefits of diversification

Experienced investors (you know the type - bald, pasty complexion with thick-rimmed glasses) take steps to mitigate risks.

They call it diversification, which basically means spreading your money around.

For instance, while stocks returned an average of 7.7% between 2004 and 2017 it hides the fact they fell nearly 40% at the height of the financial crisis in 2008. Just imagine if you had invested all your money in stocks in 2007. You would have lost more than half your money by the end of the following year (I feel queasy just writing that).

However, if you had invested some of your money in government bonds, some of those losses could have been offset, because bonds rose 10% in the same year.

Diversification doesn’t guarantee you won’t lose money but it should smooth the highs and lows and help you avoid that emotional rollercoaster ride.

It also helps you retain access to the money you need: In times of stress the ease in which you can buy and sell an asset is critical. This varies between assets, and is known as liquidity. For instance, property can be more illiquid than equities. Diversification can help.

Too much diversification?

Don’t go mad though. Investing in too many different assets can leave you swimming in confusion.

There is no fixed rule as to how many assets a diversified portfolio should hold: too few can add risk, but so can holding too many. Hundreds of holdings across many different assets can be hard to manage, and diversification for the sake of it runs the risk of poorer performance, sometimes called “diworsification”.

If you are unsure as to the suitability of your investment, speak to a financial adviser, and remember the value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.

Read more: Do you need to worry about a stock market crash?

Read more: Is investing for me?

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