Every investor thinks they can beat the market and unfortunately, many of them fail. This is largely because they do much with their investments which feels like being productive but actually reduces the chances of high returns.
In this article, we’ll explain how to focus on what you can control with your investments. The goal is to help you let go of what you can’t change and master the art of doing less but achieving more from the market.
Why you probably won’t beat the market
While financial advisers on social media will have you believe that you can beat the market, it’s highly unlikely. This is largely because investing is a long-term strategy and those looking for quick wins generally don’t find them. Instead, they tinker and tinker with allocations that don’t work and find themselves in a sticky situation and a poorly performing portfolio.
We understand that it’s tempting to be reactive to market changes and switch assets at the drop of a hat, but it’s much more beneficial to stick to what you can control. This means choosing a strategy that’s built to last and not frequently changing your position when the market fluctuates.
Three investment strategies you can control
Focussing on what you can control is the way forward with any investment strategy, so let’s explore a few ways you can do it for your portfolio.
1. Account for your own preferences
Your investments should be personal, and you shouldn’t be swayed into making decisions you aren’t comfortable with. This might mean reducing your risk appetite despite advice from an adviser or only investing in companies you understand and are confident in.
It also means signing up for advice you trust and having a clear understanding of how your portfolio is being run if you use an investment manager.
2. Diversify your portfolio
Diversification is the cornerstone of a successful investment portfolio and is something well within your control.
Instead of putting your eggs into one basket and suffering the wrath of the market during times of instability, you can ride out the storms as they come without stress with a diversified set of investments.
3. Find financial balance
The first step towards financial balance is to fully understand the fees you’re paying. They can get away from you if you aren’t careful so understand their impact before committing to anything.
You should also ensure your investment portfolio is regularly rebalanced which can mean reallocating money away from strongly performing assets. This helps you maintain your desired asset allocation and diversify effectively, leading to stronger performance.
However, rebalancing requires a professional eye and should be in line with your appetite for risk and overall strategy. It’s another disciplined approach that goes against the reflexive nature of many investors who chase trends and dips that are riddled with risk.
Conclusion
A sensible, long-term investment philosophy will outperform reactive, knee-jerk decision-making when it comes to your portfolio. Instead, focus on the aspects of your investments that are within your control and you’ll not only find peace of mind and clarity, but your investments will probably perform more optimally over time.
For advice on managing your investment portfolio, contact the experts at Cedar House Financial. Call us on 020 8366 4400 or email enquiries@cedarhfs.co.uk to get the ball rolling.