How to Win at Investing

Volatility can be a liability in investing. Choosing a fund that does not fall so much when ‘the markets’ go down can be as important, or even more so, than a fund that responds when there is a rise. For example:

• A fund that drops by 10% needs an increase of more than 10% to get back to the starting point.
• A fund that drops 10% in year 1 followed by growth of 10% for two years ends up with a lower return than an alternative fund that suffers a drop of 5% in year one followed by two years at 7.5% growth.

Logic tells us that both should be 10% up after 3 years – but try the maths:

Investment	Yr 1	Yr 2	Yr 3
£       100.00	£    90.00	£    99.00	£  108.90
	-10.0%	10.0%	10.0%
£       100.00	£    95.00	£  102.13	£  109.78
	-5.0%	7.5%	7.5%

How do you find funds that behave in a less volatile way? You need an investment strategy that suits your objectives and appetite for risk and reward – you also need a portfolio of funds that react differently to the investment market as a whole. A good Independent Financial Adviser will have access to the widest range of funds and understand not only how they perform – but more importantly why they perform in a certain way, and how those attributes will work with the rest of your investment strategy.

At Beacon Wealth Management we design our own unique portfolios that are actively managed for high performance and low volatility. We also have a range of portfolios that are Ethically sound to reflect the views of some enlightened viewpoints.

From the point made earlier about volatility, you may appreciate that defending an investment from the full effect of a market fall is important. Having done so – you need your portfolio to share in the opportunity for an ‘up swing’. This could involve changing the composition of the portfolio, an advantage of active fund management. If your investment portfolio is still using the same fund over the past 5 years – bearing in mind all the changes that have occurred – you should review your strategy – you might be sticking with under performing funds!

For a free initial review of your investments call me to arrange a meeting.

Send me a message or request a meeting on eamonn.dorling@ntlworld.com  or mobile: 07767 795816