Successful investing is all about adopting a longer-term view, diversifying risk, and giving your money time to grow. Stock market performance is unpredictable. It requires a disciplined approach, and a degree of holding your nerve if markets drop. Seasoned investors have learned that markets can be volatile and will inevitably go down as well as up from time to time. They know that probably the worst investment strategy anyone can adopt is to let emotion get in the way of logic, and to jump in and out of the stock market, panic when prices fall, and sell investments at the bottom of the market.
Diversification is key
When it comes to investing it’s worth heeding the maxim ‘don’t put all your eggs in one basket’. It’s good to spread your money around so that a poorly-performing investment doesn’t greatly damage your returns. A portfolio that includes a range of assets alongside shares, such as bonds, property, and cash, has been shown to perform better than one that is only invested in one type of asset. This process is known as asset allocation and is the starting point we take when helping clients decide where to invest.
At Partners Wealth Management, we’re completely independent and don’t have in-house products to sell. This gives us freedom to select leading investment managers who consistently outperform the market. We use ARC, the UK’s leading provider of investment research and performance monitoring, to guide our selection of the most appropriate investments for our clients, rigorously tracking performance indices across a wide range of sectors and markets.
We believe that you should consider your investment horizon as being at least five years, and we’ll work with you to ensure you have sufficient cash reserves in place to cover your requirements over this period.
How pound-cost averaging helps even out peaks and troughs
There’s an old saying about successful investment: what counts is not timing the market, but time in the market. Rather than dipping in and out, it’s much better to invest for the longer term. That way, your investments have time to grow and fluctuations can even themselves out, especially if you drip-feed money into the market on a regular basis. This approach is called pound-cost averaging.
This concept was first developed in the USA, where dollar-cost averaging has been a cornerstone of investment strategy for many years. When markets are going through periods of volatility, pound-cost averaging is a way to help smooth out the peaks and troughs.
It’s all about buying shares of a stock or fund at regular intervals. The advantage is basically that by investing a given amount over a period of time and in smaller amounts rather than all at once, the investor ends up buying more shares when prices are cheaper and fewer when prices are higher. This averages out the buying price of the investment.
Putting in place the right portfolio for your needs
We work with our clients to help them weather stock market upheavals by assessing their attitude to risk and stress testing their financial plan. That way, we know what their capacity for loss is, and how sensitive they would be to market downturns, and can construct their portfolio to meet their needs. We’ll also review your portfolio regularly to ensure it remains in line with your objectives.
So, if you’re looking to meet your financial goals and attain your financial freedom, then why not get in touch?