Bruce’s 7 ‘Secrets’ of Investment Success
1. Document your Goals & have a Plan
It’s probably no surprise that individuals with documented goals are far more likely to achieve success. Having goals is great, but without implementing a plan, you may not get there.
2. Invest in accordance with your Risk Profile
A ‘good’ investment is one that you are comfortable with, both in good times and especially in bad times!
3. Asset Allocation is vital
Asset allocation is responsible for 90% of a diversified portfolio’s return1 patterns over time. Have an asset allocation and regularly rebalance.
4. Diversification
We have all heard the old one about not having all of your eggs in the one basket. Why do so many investors continue to ignore this?
5. Investor Behaviour Gap
Investors under perform the market by around 3.50% p.a. due to poor investor behaviour2. Good advice can close the gap.
6. Don’t Chase Past Performance
So many investors have lost money investing based on past performance. It’s like betting on last year’s winner of the Melbourne Cup. Sure, last year’s winner can win again but it has only happened 6 times3 over 155 cups.
7. Work with a Great Adviser
A great adviser will add far more value than the fees you pay.
Article by Cranbourne’s financial planner, Bruce Chisholm.
1 Vanguard’s Principles for Investing Success 2013 comments on 1986 study by Brinson, Hood and Beebower, Wallick et al. (2012)
2 Dalbar Qualitative Analysis of Investor Behaviour 2015. S&P500 funds returned 8.19% p.a. over 20 years to 31 December 2015 whereas investors returned 4.67% p.a.
3 Wikipedia.org: Makybe Diva 2004 & 2005, Think Big 1975, Rain Lover 1969, Peter Pan 1934, Archer 1862