Let’s talk about this.
Look at the big picture…How do you manage your portfolio? What’s your strategy?
Because we are all different, our strategies will be different.
Risk drives return. Therefore, the practice of investing funds and managing a portfolio(s) should focus mainly on managing risk, rather than on managing returns. The practical implications of risk management should be looked at in the context of asset allocation.
Asset allocation is the process of deciding how to distribute your wealth among different asset classes and countries for investment purposes. It’s also been a buzz word that gets thrown around from one end of the investment kingdom to the other. But asset allocation isn’t a one-decision event. It’s actually a component of a structured portfolio management process and strategy.
Regardless of who you are, or how simple or complex your investment needs may be, you need to start out with a policy statement before you jump in the markets and start buying with “both hands”.
The portfolio management process isn’t about getting the highest return in the shortest period of time. It’s not a sprint. It’s more like a marathon.
I can say, without a shadow of doubt, that if you don’t look at investing like it’s a marathon, you’ll not be prepared for the long haul and you’ll burn out. Most people can’t trade day in, day out, on a consistent basis. You get tired, bored, discouraged, distracted, overconfident, euphoric, irrational, undisciplined, lose focus, etc. etc. etc. This is why you need to have a long term strategy, and it starts with an investment policy statement.
Developing…
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