As we aim to start the new year on a positive note, we are focussing on achieving goals. When it comes to investments, this can only be done by careful and diligent investing. Now it may seem easy to some people, but having done this for quite a number of years now, we can tell you that it is anything but.
You need to know the right time to invest and also the right time to sell, much like the old adage of buying low and selling high. We believe most people have a reluctance to come out of what has previously been a good performing fund, and they then inevitably get caught out when it drops in value.
What we do at MAP is basically ignore past performance to a certain extent, and put more reliance on actual performance and of course consistency. When we look at fund performances, if things are starting to drop off, we tend to no longer use that fund. It’s as simple as that!
In financial services we talk about Asset Allocation. This is just a fancy expression for investment spread. If we were looking to put together a client’s investment using a number of different funds, we wouldn’t put them all into the same fund type, e.g. UK equities. What we would do is use a variety of types like UK equities, interest-based funds, global funds, Asian funds, technology funds, etc.
If you work on the basis that from 10 funds used, four will do very well, three will be good but not brilliant, two will be average and one will underperform, that would be a fair assumption. All areas will not perform brilliantly all of the time – it is the nature of the beast – so you need a spread of types.
Another thing to watch out for is geographical areas as they will all provide different growth rates. One of the leading fund managers recently recommended looking at global economics. Their belief is that North America, Japan and some other Asian countries should do well in 2018, Europe will do not too badly, and the UK will probably flat-line.
Furthermore, watch out for emerging nations especially the likes of Brazil, who are up-and-coming. When you invest money, you also want a spread of countries so you can get the benefits that arise from them.
When you have invested money, the next thing you must do is monitor your choices. What we tell clients is the only thing guaranteed when investing, is everything will change. You can make a great selection to start with but this might change because of economic conditions in whatever locality.
If you don’t monitor a fund and it then starts to fall, you could lose heavily, and so you need to be ready to switch out of that and into another fund; one which is performing. This is where consistency comes into your thoughts – the more consistently well a fund performs, the more likely it is to continue to do so.
The final part of investing is all about risks, which is something the Financial Conduct Authority place a great deal of stress on. People should know what risks are involved before they invest so they can then make a logical decision. How MAP deals with this is to use five categories of risk, although only three are normally used as people are not interested in very low risk or very high risk.
Low risk is where the chances of loss or of significant gains are small, middle risk is where some money could be lost or gained, and high risk is where excellent gains could be made but equally almost all money could be lost. What people should do is only invest in the risk areas they are comfortable with.
At MAP, we invariably use 10 funds for each investment; and the number of low, middle and high risk funds selected are based on a client’s attitude to risk, i.e. how many funds they want in each category.
All of the above is why investing carries a lot of risk overall; there are so many things you need to watch out for, and watch all the time. At MAP, we have been employing our own investment process since we started up, so have built up a lot of experience in that time. To be honest, even we are still learning, but we use it to better the end outcome for our clients.
If you would like to benefit from our hands-on approach to investing, please contact us on 0345 241 1808 or email us at: email@example.com.
The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Links to external sites are for information only and do not constitute endorsement. Always obtain independent professional advice for your own particular situation. Money Advice & Planning Ltd is authorised and regulated by the Financial Conduct Authority.