We’re a middle-aged couple with three children and a heavily US-focused investment portfolio. How can we better diversify our holdings to reduce geographic risk?

Neil Wilson, investor strategist at Saxo UK, says it’s a common concern we hear from clients. As a multi-asset broker, diversification is in our DNA, so we consistently emphasise its importance. Many portfolios have become heavily overweight US equities because returns from the US have been strong for many years. But reliance on the US is no longer a guarantee of success.  

It would be interesting to find out whether your exposure is via single stocks or a mix of funds and exchange traded funds (ETFs), as this might affect how you go about trimming US exposure and increasing geographic diversification. If you are looking at single stocks, letting your US winners run and cutting the losers might be the first step. 

So where else should you look? Many retail investors have going long on UK, Europe and Japan at the expense of the US recently. There are clearly merits from an asset allocation point of view to looking at where there could be some secular and cyclical growth trends. Investor clients in both self-invested personal pensions (Sipps) and flexible stocks and shares individual savings accounts (Isas) have been trying to find a range of alternatives this year. 

Europe has gained attention thanks to Germany’s easing of its debt rules and broader re-industrialisation. At Saxo, we’ve been developing a ‘European Independence’ shortlist of stocks linked to these themes. Be mindful of foreign exchange fees when buying or selling overseas stocks.

The UK is also worth looking at as the post-Brexit valuation gap with the US has been closing. There are plenty of defensive names and very large dividend yields among large-cap stocks. HSBC offers 6 per cent; BP is close to 7 per cent; BHP is at 5 per cent; British American Tobacco is at more than 7 per cent. In times of market volatility these can offer some shelter from the storm.

Emerging markets may benefit from a weaker dollar. Broad-based funds and ETFs can offer exposure if stockpicking feels daunting. Still, some funds such as JPMorgan Emerging Markets Investment Trust have 40 per cent in China and Taiwan. Others, like BlackRock Frontiers, offer wider geographic spread.

While this is not necessarily a problem for you, passive investors can end up with a heavy US bias without knowing it. MSCI World tracker funds have around 70 per cent invested in US stocks, with a chunky weighting towards the Magnificent Seven of large, closely watched technology stocks. So, switching say from a US-focused fund to one with a global label might not be as big a change as you think it is. 

Bear in mind that lots of so-called ‘global’ funds are actually heavily skewed towards the US. It’s hard to find a global fund with less than a third in US stocks. Some with a big UK exposure include Lindsell Train (LTI) and Brunner (BUT), although the latter has 46 per cent in the US and 24 per cent in UK. LTI is 62 per cent UK and 18 per cent US. You might find that investment trusts, which offer a subtler approach to investing in global equities, are a place to consider. Many of these are listed on the London Stock Exchange. 

My ex has a poor credit rating but she has been awarded the house and other assets from our divorce which are still in my name. I’m worried it could impact my credit rating and my ability to move on financially if they miss repayments. Do I have any legal options?

Kiran Beeharry​​​​, partner in the family law team at SA Law, says the first issue to note is that the court has the power to distribute assets and reassign the legal and beneficial interest but no power to reassign debts. The common illustration where the court deals with assets and debts is to transfer the family home to one party subject to an existing joint mortgage.

The court via a direction for periodical payment can direct a party to make payments to a mortgage. If there has been a direction to pay a mortgage and this is subsequently not complied with, enforcement action can be taken. The ultimate consequence can be a fine or a term of imprisonment for the non-payer if they are found to be in breach.

While an enforcement application can put pressure on a party to pay a mortgage, unfortunately the courts cannot remedy any damage done to credit ratings during the time payments were in arrears. If one party continues to miss mortgage payments and enforcement action does not force compliance from the non-payer, the non-resident party may have to align with the lender in respect of repossession proceedings. A successful repossession application may bring the matter to a close. However, the damage to the credit ratings will still have been done.

The best course of action is to take preventive steps to ensure payments never fall into arrears in the first place. If one party is concerned that the other might find the mortgage unaffordable or might miss payments, it is important that the case is properly pleaded to bring this to the court’s attention before a final order is made.

If the court accepts that maintaining a property is not affordable or that both parties are entitled to have their independent mortgage capacities, then it is more likely to order a property should be sold. That will sever any ties connected to the joint mortgage.

The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.

Do you have a financial dilemma that you’d like FT Money’s team of professional experts to look into? Email your problem in confidence to money@ft.com

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