Article published by RJS Wealth Management Pty Ltd
Establishing an investment portfolio is often associated with building a home. In most instances the most damaging, yet unpredictable destroyer to the structure of a home is the weather. And just like your home, if you carefully build your investment portfolio based on solid foundations, you have a much better chance of withstanding a financial storm.
The foundations of a strong portfolio and risk management strategy rely on four key ‘pillars’ or investment principles… quality, value, diversity and time.
Quality and Value
Let’s look at the first two foundations, quality and value; this means to acquire assets that are expected to provide appropriate returns* relative to their risks. Applying this to shares, quality companies may have a good basis to their operations and growth, which means their earnings are not driven by fashion.
Quality and value may not always go hand in hand. But the key here is quality… the expectation is that they will be around for a long time, not just a good time.
You’ve heard it before but it couldn’t be more true – “don’t put all your eggs into one basket”… meaning to diversify your portfolio. Diversity may act like the scales in a portfolio, potentially providing balance. Real diversity may provide the opportunity to take advantage of opportunities when they arise, whilst balancing the portfolio with solid quality assets. By taking a long-term view**, diversity is a tool used to smooth out a portfolio’s returns.
Finally, one of the most important foundations is time… because it applies to all four principles, giving you the best chance of success. Every market will suffer periodic downturns, however, over the longer term the upturns have historically prevailed. The golden rule is don’t panic and refrain from getting caught up in the fear and greed cycle which is often fuelled by the media. Often volatility may create opportunities for future wealth growth.
For a sound risk management strategy for your investments or perhaps a second opinion on an existing one, talk to an RJS Strategic Wealth Planner today on
1300 27 28 29.
* Please note that past returns are not a guaranteed indicator of future returns.
** 7 years or longer.
This blog has been prepared by RJS Wealth Management Pty. Ltd. ABN 24 156 207 126. RJS Wealth Management Pty. Ltd. is a Corporate Authorised Representative (No. 438158) of Modoras Pty. Ltd. ABN 86 068 034 908 an Australian Financial Services and Credit Licensee (Number 233209). The information and opinions contained in this blog is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individuals personal circumstances have been taken into consideration for the preparation of this material. Any individual making a decision to buy, sell or hold any particular financial product should make their own assessment taking into account their own particular circumstances. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Pty Ltd recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this fact sheet can change without notice. Modoras Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication.