Sarah Poynton-Ryan 0:01
Money matters. I wish that I knew tall when I was an investor, a business owner and a money educator, understand it better compound international budget investment to recover from debt. No one explained to me that your money to align us at work is about normalizing the conversation. I

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Sarah Poynton-Ryan 0:27
Mechanics. It's Sarah Poynton here, investor, business owner and money educator. And in today's episode, we are going to be talking about the garden of growth. We're going to talk about diversification and how you can build a diversified portfolio. So I think it's important to start this episode with a question, right? What comes into your mind when you think about investing? I think for a lot of people, the what, what conjures up when we start to think about investing, especially as a beginner, it says a really scary stuff is risky. You could lose all your money. There's things that actually you are not necessarily sure what to do or how to do it. There's all these like uncertainties that sit inside of your brain. It could be that you're worried about being scammed. You've heard loads of other people have been scammed. You don't know where to start. It's what rich people do, like, there's all these like, inner narratives that stop us from doing investments in general. And actually, what I want to talk about today, I think it's going to help to just answer the how do I get started? What do I choose, and what's going to be the best route for me to build a portfolio? So again, stick to the rules that we always talk about, which is to start small, stay diversified, and that sort of stuff. But this goes to a deeper level of trying to explain the different types of investments that there are, how they contribute to a diversified portfolio, and that will allow you to move forwards. Now, I've got some notes here because, well, my brain doesn't remember everything, right? It tries, but it doesn't always. We're talking about the garden of growth, and we're here with my jungle today, which we're keeping this alive, which I'm very, very happy with, because it was dead yesterday, and now it's come back to life, so I'm happy. It's amazing what their water will do. Right? There's five core pillars to build in a diversified portfolio, and we call it the garden of growth, because actually, when you look at a garden and the different components in a garden, it's really easy to connect that with the different components of an investment portfolio. So if you imagine a garden, right, imagine the oak tree, the sturdy, old, long lasting oak tree. It grows in value over time. Every year it gets a bit bigger, right? Every year it just sits there doing its thing. You don't really have to do much to it just does its thing. Well, that's property, right? That's how we see property. Property is seen as a foundational investment, because it actually is a very good strategy for values to increase over time, especially in the UK. Not the same in every country, but in the UK, it definitely is. The value of it increases over time, and when you own property, you can also generate an income from it through rental now, property is not always a starter strategy, because there's loads of you listening to this, going well, that's great. Sarah, if you can afford to buy a house, even your own house, or, you know, an investment house, but we haven't got that much money, so it's not always a starting point. But if you imagine an oak tree, what you want to do is try and get a garden that's got an oak tree in it eventually, okay, but you might not need to start there. The next layer of your garden of growth is hedges. So if you imagine a garden surrounded by hedges. What do hedges do? What are they really there for? They're there to defend and keep things out. They're there to shield and keep things in and a hedge in Portfolio terms, are your defensive stocks now? Defensive stock are companies that have been around for a long time. They're defensive because they're probably not going to do anything like set the world on fire and really take off. They're probably not going to shoot up in value really quickly, but what they're likely to do is tick along nicely, doing their thing, earning money, doing their thing, going up in value. Might not be up in value quickly, but just be ticking along doing its thing. Defensive means that you've got this stable shield for your portfolio. It's a protection of your money. And what defensive stocks do is they act against market volatility really, really well, because they're not really impacted by market market volatility, because they've been around for so long. They've traded through cycles. They've dealt with recessions, they've dealt with tech booms, all these different things, and they've still managed to just tick along a hedge. Now, a hedge is pretty boring in a garden, right? And actually, some people say defensive stocks are really boring as well, but they're a really important part of a diversified portfolio, because what defensive stocks do when you have. Them is allow you to also play in the other zones, which we'll talk about in a minute, and stay protected this defensive stock part of your portfolio will just tick along while you do other things over here with a bit more volatility, and you'll protect it. Will buffer the storm, if you like, if things go wrong. Okay. Okay, so the third layer in your diversified portfolio, in your garden of growth, are your fruit trees. So what do fruit trees do? Every year a fruit tree will yield produce, right? It will give you apples or oranges or pears or, you know, a cherry tree will give you cherries. Every year, you eat the fruit, you eat the fruit, you sell the fruit, you do whatever you want with the fruit. That's your your dividend. It's going to be paying you out. We talked about that in the dividend stocks episode a couple back, by the way, if you've not listened to that yet, but every year, it just continuously does its thing. A fruit tree is a dividend stock in your portfolio. A dividend stock is a stock that you own that pays you out passive income every quarter, usually every quarter. Sometimes it's six monthly annually. Most of them are every quarter. It provides regular income. It offers growth alongside income. When you own defensive stocks, most of the time, most of the time, not always, they're not dividend paying. Some of them are, but most of the time they're not. They're just one that you hold and let it appreciate over time. With dividend stocks, with your fruit trees, because you have it, because you've got that fruit tree in your garden, you get cherries every year. What happens every year? Same you own dividend stocks. Every quarter you get a bit of cash, little bit of cash, little bit of cash. Dividend stocks are my favorite, my absolute favorite, and I think really important to everybody's investment portfolio, because they are going to give you that uplift on your money. They're going to allow you to maximize your money as often as possible. But again, it's not about putting all your money in one place. This is just one layout of a diversified portfolio. Now the fourth part of your diversified portfolio is your flower bed in your garden of growth. So imagine what a flower bed does. It contains a variety of different flowers. It's got different colors, different sizes. They bloom at different times of the year. They, you know, they they take some, take higher maintenance, work. Some just do their thing. This represents diversification, differences, different industries, different risk, different volatility, differences. That's a flower bed, right? That is your index funds when it comes to your investment portfolio. So an index fund offers you the ability to diversify very, very quickly. Now, we talked in a previous episode about the difference, and I talk about this a lot in the book. The difference between a stock and an and a fund is a stock is like owning a single stem of Rose. Having a fund is like owning 12 roses. If one fails, you're still left with some roses, whereas if this one fails, you out of luck, right? So. But in your garden of growth, bringing in investments that are into funds. It allows you that diversified exposure to a broad market. It gives you the ability to access different segments really well. So you can choose to go for a tech fund. We could go for a health care fund, but ultimately, a fund is going to just instantly give you a layer of diversification that you can't get in the same way from any other aspect. So that's your fourth layer, and then your fifth layer. And this is quite a fun layer,

but it's not for everybody. And I would say that this fifth layer is certainly not for the beginners and the people that absolutely are, you know, low risk people, super cautious people. This is your exotic plants. So imagine you're trying to grow a palm tree in Milton Keynes, or you're trying to grow, you know, really exotic plants that grow only in the desert or only in Spain, or, you know, cactuses and things like this, right? Stuff that is, in fact, really high maintenance to try and do where you are. This is the equivalent of the cryptocurrencies, right? The high volatility, the foreign exchange trading, investments, this stuff is all over the place. When we invest in these types of investments, when we try to put exotic plants into our garden in Northamptonshire, we have to accept that that might fail because there's not enough sun to grow a palm tree in Northamptonshire, right? Generally speaking. So when we move into that layer of our diversified portfolio, we're looking at our exotic trees. This is your high risk, high volatility part of the market, Bitcoin, Ethereum, Solana, these are all digital currencies. They do this. Sh, you know, if you want to ride a roller coaster, then crypto is a place that you absolutely should go and invest. But if you don't want to ride a roller coaster with your money, then don't go there, because actually it can go either way. Now, I do invest in crypto, and I do invest in foreign exchange, and I do trade foreign exchange currency sometimes, but I never do it with money that I can't afford to lose. I only do it with money. It actually is money that has been earmarked specifically for investments of that type. That fifth layer of my whole portfolio, which is my exotic stuff. So the combination of these things, when you bring them all together, these five layers, quite often I get asked, well, yeah, but Sarah, where do I start? Which one of those five Should I start with? And like we said about the beginning, property is not the starting point for everybody, because it's not accessible to everybody. But defensive stocks and dividend stocks are probably accessible to most people, because you can literally start with a tenner. You can buy a fractional share in a company like Coca Cola, and you're in, you're an investor, right? Coca Cola are very defensive, and they are dividend paying, so that's not investment advice, by the way. Don't just all go and buy Coca Cola shares now go and do your due diligence. But to give you an example of a stock that would pay dividends and is quite defensive, I would also say that index funds are a good place to go if you're someone that wants to diversify. So we have the fifth layer, which is your crypto and stuff, and we have the top layer, which is your property, the three layers in the middle, that central, those central pillars, as a beginner who's trying to figure out their way, I would start in that space. Obviously, do your due diligence. Go and check out all the things. Check out the other episodes of the podcast if you haven't yet, and then you're not really sure what those things mean. When you bring all of those things together, it's going to improve the overall health, diversity and beauty and success of your portfolio in the same way as having all five of those layers will improve the overall health, diversity and success of a garden. This has been the Money Mechanics podcast I've Been Sarah Poynton, thank you for tuning In. You

Money Matters I wish that I moved all when I was a student. I'm an investor, a business owner and a money educator. Understand it better, compound international budget, investment, recover from debt. No one explained to me that your money to align us work is about normalizing the conversation you

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