Smart Portfolio’s: Our approach to investing
Are you overwhelmed by the investment options?
When it comes to knowing where to invest your money, it is normal to feel a bit overwhelmed by the plethora of information out there and the whole process can often seem complex and daunting. Our approach to investing aims to simplify the complex whilst helping you grow your money in a low-cost and effective manner. It might not be glamorous, but when it comes to your hard-earned savings boring is better.
At Masterplan we used an evidenced-based approach to investing and our range of Smartr Portfolios are constructed based on nobel-prize winning academic research into how global financial markets operate. They follow a set of key principles that are proven to help you successfully build your wealth in a tried and tested fashion. These are-
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Understand risk but do not fear it
Risk is a scary word. Loosely, it can be defined as the chance of harm or lose. When it comes to investing, there is an inherent relationship between risk and return. The higher the potential return on an investment, the higher the risk of losing money is. If you want to make the most of your money, it is important to generate returns on your savings, but it is also important to ensure that you do not lose your hard earnt savings in the process. Our Smartr Portfolios will help you strike the right balance and achieve a dependable return on your investments over the long term.
Diversification, Diversification, Diversification!
Put simply, when it comes to investing it is important that you do not put all your eggs in one basket. Through diversifying, we can remove some of the risks that are prevalent in global stock markets and prevent loses over the long term. We take a truly global approach to investing and our Smartr Portfolios achieve diversification by spreading your invested money into thousands of individual investments spanning a wide variety of regions and sectors.
Invest for the long-term
It is difficult to predict what will happen to the value of investments on the global stock market over the next five years. An economic boom, a financial crisis or a global pandemic are just some of the world events that can cause significant volatility in the value of investments. But when you zoom out a bit, predicting what will happen over the next 20 years becomes a lot easier. It will be a bumpy road but over the course of time the value of the global stock market will likely rise. Having a long-term view on your investments will enable you to ride out the bumps in the road and be compensated for taking on investment risk in the form of growth. Investing for the long term also enables you to benefit from what is often referred to as the 8th Wonder of the World, compound interest.
Being a successful investor has more to do with psychology than it does finance. When investment markets are volatile and you see big fluctuations in the value of your money, it is perfectly normal for emotions to run high. Emotions can cloud judgement and cause us to make bad decisions. When it comes to your finances, making the wrong decisions can have serious long-term consequences. But do not fear, as we will be there to pick you up when the markets tumble and reign you in when the markets are booming to help you stay disciplined and ensure the decisions you make are the right ones.
Don’t try and beat the market, track it instead
There is a wealth of evidence to suggest that active investment fund managers cannot consistently outperform the average returns provided by the stock market. Because of this, we use an evidenced-based approach that aims to track the performance of the global stock market rather than fruitlessly pursue market beating returns. This helps us keep long-term returns dependable and investment costs low.
Keep a control on costs
Excessive investment costs can have a significant impact on the value of your investments over the long term. As such, we place getting good value for money at the heart of our Smartr portfolio construction process. When it comes to investing, some form of cost is unavoidable but when good value is achieved the cost of investing should be seen as an investment in itself.
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