Portfolio planning is a structured and intelligent way of spreading your risk through different investment options and to enjoy the diversification benefits by achieving higher yields. To be successful in portfolios and investments planning, you need to be aware of historical precedents, the average return on savings, the rate of return on investments and normal yields.
There are is no fixed rules on how to manage your portfolios and investments, but there are several basic disciplines that should be adhered to at all times. The most important one of all is that you must always understand the level of risk you are taking.
Good portfolio & Investment managers understand that they do not know what will happen in the future. All they can do is to look at what has happened in the past, in both good times and bad; and build a portfolio that would have withstood previous downturns, and would have yielded reward in the good times. This basically means using diversification in the assets you purchase, and working from a bottom up approach. This means you focus on protecting your capital base and then target yield. The yield you target should then decide the level of risk you will need to take?
For example say you are happy with a yield return of 10% this year, it is most likely this could be achieved with a portfolio that ensures at least 80% of your capital base is always protected. And that no more than 20% is at risk no matter what happens in the markets.
If you target a yield in excess of say 20% then your portfolio will need to invest in higher risk holdings such as equities, private equity and other sophisticated investments. But your capital at risk will be far higher than the example above. A targeted yield of 20% would realistically have to risk volatility of around 50 to 60%.
You must ask yourself could you ride that level of volatility? If the answer is no then your portfolio is not balanced with your attitude to risk, and in turn when things go wrong any decision you make will be based on emotions, in this case the emotion of fear instead of sound financial judgment.
Your investment objective must be in line with the risk you are willing to take; and this must be realistic.
Balquidder caters to the needs of international expatriates and international investors across the globe. The majority of our clients are professionals and successful in their chosen fields. You may be working for a large international company, contracting overseas, a diplomat, or run your own business, you may have retired and need advice on how to best structure your existing portfolio or cash deposits? Whatever your circumstances, we could help you to achieve your investment goals and financial objectives.
At Balquidder we only work with leading investment companies based in the Channel Islands, Isle of Man, Switzerland and Luxembourg. We do not handle client money, our clients send their cash direct to the companies we recommend. The financial institutions we use are protected by Investor protection laws which protect 90% of your assets should that company be unable to meet its liabilities.