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Created on 19.07.2018

Put it simply, please! Cluster risk

Christian Leuenberger, Private Customer Advisor at the Basel Steinenberg PostFinance branch and the Liestal consulting office, explains what a cluster risk is in 45 seconds.

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Our expert Christian provided an excellent explanation. If his 45-second explanation was a bit fast, you can read exactly what a cluster risk is here:

A cluster risk is when specific risks accumulate in your portfolio; for example, if you have invested half of your investment capital in shares in a single company, sector or region. If the share price falls or an entire sector or region suffers a downturn, a large part of the capital you invested is affected. To avoid such risk, you should diversify your portfolio. This means ensuring your investment capital is not too heavily weighted in investments in individual companies, markets, currencies or sectors, etc. The easiest and most affordable way to achieve that is through investment funds.

You can read more about the topic of diversification in the article "Diversification – why you shouldn't put all your eggs in one basket".

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