Without a doubt global share markets have run well over the last 12 months, however over the last week we have seen markets begin to correct. The only question that remains unanswered is how far will they correct and will this correction turn into something more serious? The answer is, nobody really knows!
While many Advisers will beat the diversification drum, to alleviate the fears of investors by advising clients to have a diversified portfolio of domestic and overseas managed funds and or shares. However, true diversification can only be achieved by reducing the correlation of your investment i.e. by having investments NOT correlated to the share market.
Correlation risk can be overcome by employing risk differentiation or having different types of investments with different types of risk, so that no one thing like the share market crashing can take your entire portfolio down.