Portfolio Management

Inexperienced investors tend to follow the masses and adopt the herd mentality of investing in what is perceived as the current market trend - this can be extremely costly.

In the late 1990s many investors piled into equities when markets were peaking; in 2001 and 2002 when the correction came (bear market) they sold, some making losses. Had they had the correct investment strategy from the outset and been prepared to invest longer term in a balanced portfolio, they would have benefited from the market change from 2003.

The property boom closely followed this and it was difficult to get investors to look at any asset class other than property.

Genuine young people found it impossible to buy their first home and more than ever needed objective financial advice but many investors didn’t heed the signs and it was self perpetuating, from late 2006 it just didn’t make financial sense to buy property other than as a necessity.

This situation came to a head in late 2007 and early 2008 with the ‘CREDIT CRUNCH’ and the inevitable downward revaluation of property.

Numerous new investors now know it is highly unlikely that an asset class will continue to grow indefinitely but many are on a tough learning curve.

Recent research demonstrates that over 40% of those under 35 have no exposure to equities and nearly 25% of those over 55 have at least 50% of their portfolio in equities. In our opinion, this is the wrong way around. The younger investor with time on his hands can afford to (within his/her risk profile) take more risks and should have exposure to a wide variety of assets within savings. The over 50s, however, should generally be gearing down the risk in their portfolio.

Too many investors chase markets up and down, jumping from one asset class to the other. Although there are those few that succeed, we feel it is more advisable to have a longer term plan and get the benefits of a well-balanced portfolio.