Rear-view mirror investing
Making investment decisions based on past performance is a high-risk strategy at the best of times and we never recommend it. In the current climate where the strength of investment fundamentals has weakened and new norms are being created, it is even more important that investors look beyond historical numbers and incorporate new investment insights. This is due to the dramatic global economic and political uncertainty that has and will change the drivers of success for future investment performance.
Lack of portfolio diversification
As this Report shows, all asset classes are vulnerable to the vagaries of the market. Having a narrowly focused portfolio by putting all your eggs in one of two asset classes exposes investors to a lot of unnecessary downside risk.
Reliance on residential property
Following residential property's star performance up to 2015, it again retained its place in 2016. However, we believe it carries significant stock-specific risk for people seeking stable, positive returns. While residential property overall has achieved strong positive returns over the last 10 and 20 years, it would be a mistake to blindly rely on the upward trend continuing across the board i.e. for the one or two properties an investor may have exposure to.
Investing in over-priced traditional assets
Many global market commentators agree that the low-yield, highly dynamic environment we highlighted in last year's Report is likely to continue for core asset classes, especially shares and bonds. Our investment strategist group continues to forecast lower returns and higher volatility going forward as equity markets (especially in the U.S.) are becoming more and more expensive, while markets may experience sharp sudden falls as unprecedented levels of political changes in numerous countries create fear and uncertainty.
Setting and forgetting
We detail what you need to do to effectively manage your portfolio including understanding your current portfolio exposures and the options for changing your approach to get from where your portfolio is now to where you want to be. Lastly, we compare how your decision-making and implementation processes with the outcomes you are trying to achieve.