I’m embarrassed to mention this, but, I have left my gardens unattended for a couple of months now and they are looking disgraceful. Overgrown lawns & weeds everywhere.
Keep reading as I discuss the relevance in protecting your investment portfolio.
Since returning from a family holiday I’ve been really busy working on my business and helping a number of clients transition into retirement confidently so they can live their best life in retirement.
Combine that with the kids sporting commitments, I have let my garden get to the point where I am quite embarrassed about the current condition.
Lucky it’s winter where things don’t grow as fast.
Here’s the thing, I know when I get around to it it’s going to take a lot of effort & more time to get it pristine condition again.
Had I’d been more diligent, taken a little time each fortnight it would require less work and be in peak condition.
I’m sure you can relate.
Sometimes life gets in the way. Life gets crazy and the less important things get put to one side while the more urgent, now tasks are front of mind.
I could quite easily get someone in to mow my lawns, poison the weeds and keep everything in ship shape and I know people who do this and their gardens are amazing.
I’m a little old school when it comes to my garden and when I get the time I love spending time in the garden.
It’s like a little release for me, kinda soothing in a weird sort of way.
As I talk about my embarrassing untidy garden, have you considered the condition of your investment portfolio lately?
You see, every week I talk to new people about the investment portfolio’s they are managing and most of them are looking like my untidy garden.
There’s been no maintenance, no ongoing upkeep of the portfolio.
Like most I see, there is no real strategy behind them, and I mean a really great thought out strategy.
They buy a little bit of this and little bit of that.
Little consideration for the risk they are taking nor diversified as much as they should.
They consider diversification either a handful of Australian shares or two asset classes (Australian shares and property).
Or they have been scared to invest at all, leaving the majority if not all in cash.
If this sounds like you, you’re not alone…
Yes, earning less than the inflation rate, so literally, they are seeing their purchasing power go backwards. It pains me to see this.
It doesn’t have to be that way…
One way of fixing this problem is to DIY your own maintenance. If you know what your preferred allocations are to each asset and they have increased trim them and reallocate to your more conservative investments.
Now, it might you might do it or you might not.
Here’s the thing many struggle to take the action required then regret it when markets behave badly and emotion kicks in.
Or, alternatively, they might look for a bandaid solution.
It’s not optimal but might do the job for now.
There is however a better solution.
You find a professional to help you be accountable to your longer-term plan.
Given the route of most bad financial decisions are behaviour based this is where a great, not a good, a great adviser with proven processes and systems can be your lifesaver?
Here’s how that would work…
How to keep your investment portfolio in peak condition?
#1 Know what it is you are working towards.
I know I bang on about this one a bit, however, it’s what drives investment decisions.
Most start backwards, invest first, plan later.
Do it right the first time and you’ll never have to worry again. BIG vision. Then how is this going to move me towards it?
#2 Figure out the risk you are comfortable accepting.
Sounds pretty basic right?
I find many get this part very wrong or understand little about the risk they are accepting with their investments.
And when everything is going well, great, but when investment markets tank, that’s when things scary, emotions take over and big mistakes are made.
It dosn’t have to be that way.
Recently I was talking to a potential client and reviewing their super portfolio they were managing.
They completed our investment risk game which uses behavioural science to determine the amount of risk based on how they react to different market scenarios.
They came out pretty conservative while their actual investment strategy was super aggressive.
Massive misalignment leading to worry and anxiety in the future.
#3 Diversify, Diversify & Diversify some more.
This is the number one rule in investing. Don’t think investing in 15 Australian shares is diversification.
Diversify across different assets (shares, property, cash & fixed interest) then diversify across different countries. This is real diversification.
Don’t let the home bias ruin your returns.
Don’t forget Australian is approx. 2% of the world market.
There are massive opportunities outside of Australia.
#4 Rebalance at least annually.
A simple but effective rule however many don’t implement it, instead constantly chasing that little extra in return.
While not sexy, it’s about trimming the winners or the assets that have grown well to a point where they represent a larger portion in the portfolio than previously set.
What do I mean by this?
Looking at our client’s investment portfolios, we have held an overweight allocation to Australian shares.
That is our preferred position for a Balanced Investor (60% risky/40% defensive) with 20% allocated to Australian shares.
We had an overweight allocation of 30% meaning our preferred holding was 26%.
Given the market rise recently our allocations were exceeding 26%, closer towards 28/29%.
A decision was made to take advantage of the strong market conditions and reduce back to 26%.
It was timely as the reduction was made prior to the markets being sold off.
Those funds were being retained in cash should we see opportunities present themselves in the near future.
It could also mean rebalancing back to the original asset allocations you set for yourself when you set up your investment portfolio.
Depending on our client’s position, we do this at least annually to keep the level of risk in check.
Will you keep your investment portfolio well maintained and not untidy like my garden?
Saying you’re going to do it and actually doing can be two different things.
One, life gets in the way and second, trying to figure out exactly what you should be doing gets confusing.
Our behaviour takes over and like most, we don’t want to sell when our investments are making money.
Here’s the rub, well-maintained investment portfolios will provide the returns you need without the added risk being taken on board.
It’s about being disciplined and not allowing your emotions to take over.
Do this at least every year and you’ll be in great shape.
PS. Need some help to keep your investment portfolio in check so you don’t end up taking on any more risk than you need to and keep it maintained book a call below…
Looking to remove stress and anxiety when it comes to your retirement plan?
Book your Confident Retirement Call here>> and we’ll spend 30 mins over the phone helping you build the first stages of your Gameplan for retirement. It’s at our cost and you’ll have the framework to achieve your retirement with less risk and more confidence.
Have any questions, feel free to email me at [email protected]
Don’t feel Overwhelmed anymore…
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Challenging the Status Quo!
Glenn Doherty – CFP – Founder & Financial Organiser at Jigsaw Private Wealth
Advice Disclaimer: Any reference in this publication to the provision of advice refers to advice of a generic nature, and should not be taken as product or investment recommendations. Before any action is taken based on the information provided, independent financial advice from a licensed financial adviser should be sought. Financial Freedom Project Pty Ltd ATF GA & DC Doherty Family Trust Trading as Jigsaw Private Wealth is a Corporate Authorised Representative of Exelsuper Advice Pty Ltd. The information contained in this publication is of a factual nature only and is not intended to constitute financial product advice. Information is current as at June 2018. This is an online information blog. It does not imply an offering of securities.