I suppose the headline of this article could be a bit misleading because I believe that no-one can actually work the markets; it’s usually the other way about – the markets work you!
This is a basic principle of how we invest any client’s money – we always take a good spread of funds, and by that I don’t mean picking different equity funds. It’s far wider than that.
Low-risk funds “tend” to be more interest-based, whilst middle-risk funds are more about equities. High-risk funds are about specialities in a variety of flavours. What we as advisers need to do is always give clients a good spread of risk, and that’s why part of our fact-finding is to find out exactly what a person is comfortable with in terms of risk. We invariably use 10 funds for a portfolio and when we find out what someone wants with regards to risk, we can then allocate the funds.
If for example, someone says that they are middle-of-the-road and balanced, we would interpret this as 3 low-risk funds, 4 middle-risk funds and 3 high-risk funds. Looking into this further, we would choose 3 low-risk funds, some of which are interest-based, and so less volatile. Middle-risk funds would usually be equities – whether UK or Europe, and in some cases, Global. High-risk funds would be American, Japanese or some speciality like an Alpha fund (i.e. start-ups). So, by picking 10 funds across the categories, the client not only gets a good spread of types, but they will also get a good spread of regions and risk categories. In other words, you are covering all bases. You know the saying about putting all your eggs in the one basket.
In addition to this, you also need to watch trends to see what areas are doing well and similarly, which are not. At the moment, America is doing well but I think that it is slowly coming to the end of the bull run it has been on. Japan is doing well and seems to be holding up. Europe is also doing well, as is Asia and some Emerging Markets, but not all.
We pick a basket of funds for a client based on consistency on how well they are performing. This gives us an insight (and that’s all it does) on how it might do in the future, but you do need to watch the trends. Finally, you need to keep watching this to ensure a fund is doing what you picked it for in the first place.
For any enquiries or just an initial chat, contact Andrew Singleton on 0345 241 1808 or e-mail us at firstname.lastname@example.org.
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