Eggs, baskets and investment diversification

It’s not Easter for a long time yet but Eggs and Baskets spring to mind when reading today’s article by John Ficenec in today’s Telegraph.

As he stated;

“Successful investment doesn’t depend on whether you invest right at the bottom and sell out just as markets peak.

“It is not the ability to pick the next Apple just before it rockets. Nor is it handing over everything to the star fund manager who beats the market year after year.

“There are three simple priorities in investing; allocation, allocation, and allocation.”

As parents have taught most of us “don’t put all your eggs in one basket” . This is as true of investments as anything else.

John Ficenec went on to describe the importance of investment asset allocation and it will have struck a cord with his readers, it certainly did for one of his readers who is also a client of ours who has this morning emailed me having read the article with the comment “Did you see the article in today’s Telegraph about asset allocation? Sounded very familiar and reassuring”.

This is because asset allocation is one of the bedrocks of our investment philosophy and we have been banging on that drum for many years.

Timing the market is fraught with danger because the chances are it is as likely to be wrong as it is right.

Instead investing for the long-term and in line with established financial planning goals makes much more sense.

Diversification (a posh word for not keeping all your eggs in one investment basket) across various assets classes, cash, bonds, equities and property makes much more sense than chasing double digit returns with 100% invested in shares.

The colour pie charts that John published make absolute sense. That not stock or fund selection is where most of the long-term investment returns come from and every investor needs to ensure that their portfolio has a proper asset allocation model at its core.

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