Mike Coady Talks Investment Performance

Ever wondered what it takes to maximize the performance of your investment portfolio? How do you extract the most value from your investments without having to have a PHD in investment management?

Let us start by comparing a financial portfolio to a vehicle. If this vehicle is not regularly maintained and provided with the proper fuel, it will never arrive at the intended destination. You don’t need to be a mechanic to get to the final destination, you just need to stick to the fundamental basics. Within the world of finance, this principle is simply known as investment performance.

On a daily basis, financial professionals address concerns such as “How have my assets grown and matured?”, “Is there any room for improvement? “or “Might it be better to steer clear of a specific sector for the time being?”.  However, just as you would not need a mechanic to tell you your vehicle needs fuel, there are ways in which even novices can capitalize on their existing portfolios. Let’s take a look at a handful of sure-fire strategies that will help to ensure that your assets perform to the best of their ability.

Investing 101: All About Diversification

Although this first observation is likely to appear entirely obvious, you would be surprised to learn how many investors fail to develop a diversified portfolio. This is akin to loading all cargo aboard one side of a transport vessel and then becoming surprised when it happens to sink during a rough patch of ocean. A diversified portfolio will normally contain a wide spectrum of holdings and various asset classes such as:

  • Stocks
  • Commodities
  • CFDs
  • Short-term holdings such as Forex pairs
  • Bonds and treasuries

The main strategy here is that a sudden dip in a single asset class can often be offset by positive investment performance within other asset classes. This allows you to mitigate the risk of putting all your eggs in one basket and, if done correctly, protects your capital whilst still providing you with a positive return or growth.

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Keeping Costs to a Minimum

One of the reasons why we are witnessing the rise of so many self-made investors involves the fact that anyone can register with an online trading platform. Still, it is important to keep in mind that profits can often be eroded due to hefty fees and commissions. Take you’re time and investigate different platforms or systems in order to understand how much you can expect to be charged. While the majority of fees are in the single percentile digits, there is no doubt that such expenses can quickly add up over time and the compounding effect of this can be devastating. The same holds true in regards to charges that may be levied as a result of deposits and withdrawals.

Leverage the Power of Expertise

Even professionals such as Warren Buffett will readily admit that there is always something new to learn within the world of investing. This is why it is best to seek the advice of experts and financial professionals via social trading platforms and similar circles. However, your ability to pick a winning stock (or combination of stocks) can also depend upon obtaining a wealth management specialist. These professionals only make money if their actions cause you to turn a profit. After all, you wouldn’t seek counsel from an engineer if you need medical advice. Mutual funds and ETFs are often overseen in such a way and this can provide you with a hands-off means to accrue a lucrative side hustle while still being able to focus upon the investment performance of your personal holdings.

Don’t Shy Away from Market Pessimism

Greed and fear are the two central emotions that drive the financial markets. Assuming that you enter into a decidedly bearish phase, would you begin buying, or would you instead run for the proverbial hills? As the expression goes, “never buy when it is high”. This is another way of saying that pessimism can work in your favor. As market confidence dries up and investors begin to shift their holdings, you will often be presented with a number of lucrative opportunities to invest in previously expensive stocks at a discount to their par value. Over time, once markets stabilize and the stock price corrects, this would lead to substantial gains. In essence, those who allow fear to overtake pragmatism and sound judgment will always remain just behind the curve.

Avoid Making the Mistake of Timing the Markets

Another common error is to believe that it is possible to accurately predict where the markets or an individual stock may be headed from a medium-term point of view. The fact of the matter is that such a “golden algorithm” has never existed. Even the most advanced computer models and artificial intelligence programs have rather dismal track records, so never be fooled into believing that you have somehow come across the proverbial crystal ball. Instead, remain focused upon building short-term profits which can then be placed within long-term holdings. This is a much safer strategy when compared to viewing the distant horizon only to discover that you have missed opportunities that existed just beneath your feet. The golden rule to remember here is that the key is not timing the market, it’s the time you spend investing in the market!

Learn to Appreciate Tax-Efficient Forms of Investing

We always need to keep in mind that successful trading will lead to capital gains. Although there is no doubt that this is the ultimate goal of every investor, such profits may incur additional capital gains taxes. This will often result from heavy trading cycles. While your portfolio could very well appear to be performing adequately, its material gains might instead be offset by the tax obligations that you are required to pay. This is why it is sometimes better to adopt a buy-and-hold approach that is more centrally focused around funds. Exchange-traded funds (ETFs) can be particularly useful due to the fact that they are not as heavily traded as active mutual funds. Therefore, your tax obligations will be minimized.

Avoid Listening to the So-Called “Gurus”

Always be wary of someone who claims to have all of the answers. The truth of the matter is that these so-called “oracles” tend to be marketing a product or service as opposed to providing genuinely novel advice. If you choose to follow such digital snake charmers, the chances are high that the performance of your portfolio will suffer as a result. Sticking with tried-and-tested methods is a much better way to enjoy longitudinal profits.

Stay true to the course

On a final note, one of the most fundamentally important rules to remember is to stay true to your investment strategy. The common mistake here is to have a knee-jerk reaction when markets tend to fall. This often results in locking in losses and missing opportunities to “buy low”. Whilst it is important to constantly assess the performance and rebalance where necessary, making drastic impulsive changes can have a negative long-term effect. Have the courage to stay true to the term and investment strategy you employed from the start.

Maximising the performance of your investments does not necessarily have to represent financial brain surgery. This is why the advice mentioned above embraces both practical and pragmatic strategies. Above all, keep in mind that mistakes will naturally be made from time to time. The key is learning from such errors and to move forward.

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As an expat, investment planning is essential and needs to be thought-through with the assistance of an expert.

For more insights, further advice or guidance, you can get in touch HERE.

Blog published by Mike Coady.


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