Investors around the world are always worried about two things – how to adequately manage the risks associated with their investments and how they can ensure returns on their investments. These are very reasonable concerns by the way, and chances are you might have been in search of a workable plan.
The Advice: You can stop searching now because we have found the perfect advice for you, courtesy of Igho Alonge. The former Fixed Income Portfolio Manager, who is popular on Twitter because of his simple but workable investment advice, recently tweeted on this topic.
According to him, you can solve 50% of your risk management challenges and 90% of your portfolio return issues by properly allocating your assets and selecting your security. He went further to add that you need to have a good understanding of how the capital market works, even as you need to be humble.
“Do you know that with proper asset allocation and security selection you’ve solved 90% of your portfolio return problems and 50% of your risk management challenges?
“Add a very good understanding of market cycles and a healthy dose of humility, and you’re almost home and dry.”
Let us discuss: Some people are probably wondering what this really means. Do note that Investopedia defines asset allocation as a strategy in investment which is simply all about balancing risk and reward. It entails assigning an investor’s portfolio assets (I.e., between equities, fixed income, and cash & equivalents) in accordance with the investor’s goals and risk appetite.
There are six different asset allocation strategies that can work for you, depending on what your investment goals are. These strategies are highlighted below.
- Strategic asset allocation
- Constant-weighing allocation
- Tactical asset allocation
- Dynamic asset allocation
- Insured asset allocation
- Integrated asset allocation
- The bottom line
You may read more about these asset allocation strategies by clicking the link here. Or better still, consult a professional asset manager, according to Tampioruobari Osari who responded to Alonge’s tweet.
That butrresses the importance of investors engaging the service of active asset managers. "Proper assets allocation"
— ??Tampioruobari Osaro?? (@tampioruobari) January 15, 2020