By Nigel Green, founder and CEO of deVere Group
Your investment portfolio is outperforming expectations, but you want it to do even better, right?
Your portfolio is underperforming, and you want it to do a 180-degree spin and start going in the other direction – and quick – correct?
Whatever the story, we all want to maximise returns. Here are three simple yet fundamental tips I have learned throughout my career that can help investors get the most from their investments.
Have a plan
Believe it or not, all too often investors don’t have an established investment plan. There’s no strategy to what they’re buying and so they end up with a mishmash of all kinds of things in their portfolios. And more often than not, the result is chaotic and underachieving.
You know the old adage ‘if you fail to plan, you plan to fail’? Well, this is certainly true with investment.
A clear strategy will give you clarity on the end result, your long-term financial objectives. It will give you laser-like, directional focus to remain on track on reaching, even exceeding, your investment goals by guiding you on what to buy, on what not to buy (this is sometimes even more important) and on what to sell.
Having a plan will help you to avoid making rash or overtly emotional investment decisions or inadvertently or consciously adopting the well-known herd-mentality. All of these, typically, hurt portfolios.
As Bill Copeland once famously said: “The trouble with not having a goal is that you can spend your life running up and down the field and never score.” How true.
Working closely with an independent financial adviser is almost universally regarded as the best way to devise, implement and then manage a strategy. This strategy will, of course, involve ‘keeping some powder dry’ to take advantage when good opportunities arise.
Know volatility can be good
Investors can grow their wealth during times of volatility due to the buying opportunities. We’ve seen this throughout history. See-sawing markets are a chance for investors to put new money into markets at lower prices. A slump in the market means that there are high quality investments available at more attractive prices.
As I have been quoted as saying in the media: “Investors would be urged not to sit on the sidelines waiting for calmer waters in the markets. Instead they should ride the wave of volatility for their longer-term wealth, security and freedom.”
Buying when investments are cheaper is not a magic secret, of course, but people do often overlook it, often due to the aforementioned herd mentality.
Arguably the world’s greatest investor, Warren Buffett, once said that as an investor it is best to be “Fearful when others are greedy and greedy when others are fearful.”
So when others are greedy, prices typically are too high, and you should be wary of overpaying for an asset that would lead to decimated returns. When others are fearful, it can present a great value buying opportunity.
Remember: Price is what you pay, value is what you get.
All investors know the importance of portfolio diversification – or the ‘not putting all your eggs in one basket’ theory. Diversification is essential as it helps you mitigate risks and take advantage of the opportunities. True diversification means not only spreading your money across asset classes and sectors but also across geographical regions too.
In today’s world, more than ever, it is important that investors consider a more global perspective. It is a myth that needs to be debunked that there are inherent risks from international investing. Quite the opposite is true. The greater diversification that is secured by going global, the greater the reduction of overall portfolio risk.
There are many established retail funds that provide international exposure, using a wide variety of methods.
If you follow and stick to these fundamentals, I’m confident most investors will be able to boost the performance of their investments.