Much is written about portfolio diversification, typically extolling the virtues non-correlation can bring investors. However, in practice, the level of portfolio diversification attained by even savvier investors is often limited, with the underlying assets remaining highly correlated.

Over the past decade or so, we have seen a massive shift towards lower fees and easier access to almost all traditional financial assets. The ease with which one can now open digital trading platforms and transact stocks, bonds, funds and ETFs often via just a smartphone has been remarkable.
 

However, whilst access to and the management of traditional assets has improved tremendously, the same pace of change has not been experienced with more sophisticated financial or tangible asset classes. Access to quality Alternative Investments has improved but significantly lags that of traditional assets. Additionally, the better hedge funds and structured products still command relatively high entry levels, and investment typically needs to be via a private bank or directly with the asset manager.
 

It's easy to say that investors should allocate evenly across these asset classes to achieve adequate portfolio diversification, but this is far more challenging in practice. Property typically takes up the lion's share of an individual's wealth, usually leading to all other investments being heavily skewed in favour of financial assets.

Until recently, being able to build a robust portfolio of quality alternative or tangible assets with any degree of confidence or security remained elusive to all but Ultra-High Net Worth Investors. However, digitisation and particularly the advent of the Fintech sector now mean that even these assets are accessible to the informed investor.

True portfolio diversification requires an investor to spread their investments across several core disciplines, as outlined below.