Well there is no comprehensive list for this one – when you ask a professional investor, they will often jump to factors such as the economy, sentiment and interest rates. All of these are very relevant factors, of course some have bigger impacts than others. So, we’re going to focus on some of the factors that are more within your control, with our help or through your chosen investment manager.
If we only had a euro for every time an investor panicked and exited the markets after they fell, and for every time investors bought in at the top of the market – well we’d be long retired! We see this all the time; fear in falling markets and people selling as a result, and greed in rising markets with investors then piling in and buying expensive assets. Very often, doing nothing is the right strategy. Don’t try and time the markets, stick to your long-term plan.
The earlier you start investing allows the magic of compound interest to get to work. The longer you then invest allows this compounding to really deliver over time. This is one of the big reasons why we encourage people to take a medium to long timeframe with their investments. Markets are often quite volatile over short periods of time, so investors who are in for the long haul are usually rewarded for doing so, both by higher returns and a more stable journey.
The allocations that are made between different asset classes is a very important decision – how much you are invested in equities, property, bonds or cash etc. Asset allocation is an important driver of investment returns, and is a factor that we spend a lot of time considering when helping clients to build their investment portfolio.
Out-performance in stock selection is a hard one to predict as the focus is so narrow (individual companies) and past performance is not a guide to future performance. Also, just because one investment house outperformed in stock selection in recent years is not very meaningful, a far better guide is to understand an investment manager’s philosophy and stock selection process. Getting your asset allocation right is a more important factor than stock selection.
In summary, let us build the right financial plan for you. We will then consider the right investments to meet your specific circumstances and your appetite for risk. We’ll help you select the right product based on your tax profile and the costs involved. And then we’ll look for this to deliver over time, reviewing and monitoring it to ensure it continues to be the right strategy for you.
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