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| Adrian Mastracci, investment counsel at KCM Wealth Management, says “Investors who concentrate on these five simple moves will easily mend their portfolio foundations. They are also rewarded with returns more in keeping with expectations." |
For Immediate Release
Vancouver, BC (November 2, 2004): Mending a portfolio with some nagging cracks in the foundation need not be a complicated exercise.
Adrian Mastracci, investment counsel at Vancouver based KCM Wealth Management, comments, “A variety of market events have likely sprung a little chaos on portfolios. Some may have left cracks in the foundations that need mending. Perhaps quickly.”
“Fortunately, it only takes five easy moves to heal the portfolio back to health,” continues Mastracci, “For retired investors, these moves play an even bigger and more important role.”
“Some portfolios may only be bruised. Others may need significant repairs,” explains Mastracci, “They may range from too little diversification to a complete investment plan overhaul.”
“But don't just make changes for the sake of change,” indicates Mastracci, “Know where you are heading before taking remedial actions.”
“Investing is about setting a course to achieve a specific return so that the personal goals become realities,” notes Mastracci, “And be sure that emotions are removed from the decision process.”
“Accumulating your nestegg is typically a long journey,” remarks Mastracci, “Pace yourself, a few good investment policies can help immensely.”
“Some investors may have left it a little late, so it’s wise to begin saving early,” adds Mastracci, “However, the foundation for a successful portfolio still requires clear investment policies.”
Mastracci profiles the five easy moves:
1. Establish reasonable goals
Focus on what you want the nestegg to do for you. The portfolio is influenced by your closeness to retirement, appetite for risk and investment personality. Let’s not ignore the effects of inflation.
It's also affected by the size of the nestegg and available saving capacity. And, most importantly, by the rate of return required to achieve your goals, such as financial independence and retirement.
2. Consider diversification and risk
Make diversification your lifelong best investment friend. Asset mix decisions provide the biggest form of portfolio diversification.
Geographical diversification is also important, say into Canadian, US and global markets. And limit single investments, say a stock, to a maximum of 3% to 5% of total portfolio value.
Understanding investment risks brings much needed perspective to the portfolio. The big ones are the ability, the willingness and the need to take the risks.
Be mindful of investment quality versus yield. Especially for investors nearing or in retirement. The reductions in yields during the past four years make it tempting to sacrifice quality.
Identify the investor profile which fits best. The most familiar ones are guaranteed, conservative, balanced, growth, aggressive and speculative. Then stay invested within your profile.
3. Establish the investment mix
Studies show that investment mix decisions have the biggest impact on portfolios of any single factor. Neither stock selection, nor market timing is even close.
Investment mix is the combination of asset classes, such as cash, bonds, and equities. It's also about choices such as large versus small companies, growth and value investing.
Your appropriate mix of assets considers not only your goals, but also your investment horizon. Even at age 65, your horizon could easily be 15 years.
4. Skip yesterday's winners
Too many investors are preoccupied with accumulating a portfolio full of yesterday's winners. This is an excellent strategy on how to get burned.
A portfolio with emphasis on consistent returns will serve you better than one with emphasis on performance. Especially yesterday's performance.
5. Minimize losses and investment costs
Making portfolio selections is not about always being right. Part of investing is about coming to grips with the prospects of being wrong. Astute portfolio managers do admit to being wrong.
Every loss starts out as a very small loss. What really hurts portfolios the most is not incurring the losses. Rather, it's keeping them far too long. Be objective, know when to fold and cut your losers.
Pay attention to all the costs of buying, holding and selling the investments. Particularly the ones that do not send out invoices, like mutual funds.
The collection of expenses, front end and back end costs can befuddle many investors. Expense levels around 3% a year are commonplace for many investments. But there are alternatives.
“Investors who concentrate on these five simple moves will easily mend their portfolio foundations,” summarizes Mastracci, “They are also rewarded with returns more in keeping with expectations.”
“It’s wise to capture the five steps into your written investment plan,” concludes Mastracci, “The blueprint for your precious financial house. Your nestegg depends on it.”
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