When you invest any money, then you need to take into account:-
- What other areas you are going to invest in
- How much you are going to invest in other areas and how does this balance with the total approach
- When you invest in any fund, you always need to do your research, and if you invest in a load of funds – then that is a load more research
- Since you need to do your research regularly, then more funds means a bigger future commitment to research – and that costs time and money
From an early point when I started doing investments, I have always worked on some basic parameters such as the minimum to invest in any fund should be £5,000 and say a maximum of £50,000. On a number of occasions early doors when I invested less than this, I always found it very difficult to make money – hence why I always do a minimum now of £5k. Number of funds? I tried a few strategies early doors as well and came to the conclusion that 10 funds could give you a good spread without a heavy workload for maintenance, and that ticked most of the boxes.
Remember of course that each fund will have its own investing process, but I would say that you can probably bet on them investing no more than 5% in 1 investment, so at the very minimum they are going to have at least 20 investments, and then if for example they have say £100 mn in their fund, you aren’t going to get 20 investments of £5 mn each, no it’s more likely to be a good bit more. Work on the basis that most funds will go for a reasonable spread of investments and have around 75 – 100 investments, and so if you therefore think that you start with 10 funds to invest in, then that could mean that you are investing in 750 to 1,000 companies – and that’s a good base spread.
I personally have used 10 funds for a while now, and it gives people a good spread of investments and doesn’t add that much to the workload, and that’s important because most people will start with the best of Intentions in terms of research, but after a period it becomes tedious. Because it gives a good spread, it has always given me and my clients good results – and that’s what we are all doing this for. I have shown over a long period that 10 funds work well for everyone.
M A P looks after client’s money as if it were our own.
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