Tuesday, 7 December 2010

What is my Investment Strategy 1.

OK, so whats my investment strategy. Well like most private investors I have a portfolio with remnants of previous strategies (indiscipline), and my strategies and behaviours are a culmination of previous experiences, good and bad, my psychological profile, and further education.
I do find that certain shares and strategies work better in certain times and there are always more fashionable "herds" roaming the market.
At times, the stock market can also seem like a litmus test for the mood of the nation or global economy and this absolutely does affect share prices.
Currently, the mood seems strained and wary across the globe with most people recognising a need to cut spending but not wanting it to affect them and not wanting to be told by the incumbent powers that be. An understandable reaction  when the architects of the credit crunch appear to be getting off scot free 
Personally, having also been caught out by the high risk rollers of the investment banking industry, the dodgy used car sales approach of the retail banking industry, and the short sighted policies of regulatory bodies and government, I am now seeking to rebuild my investments to secure mine and my family's future.

I have always tried to maintain a balance between safer interest paying savings and my investment portfolio which worked well when Isa's and bank accounts actually paid interest but seems less wise now that government and banking are robbing our interest to re-capitalise themselves.
But, inevitably things will find a new norm once the artificial tampering is removed so I am not about to make rash decisions that will need to be reversed later.

This is a slightly modified version of the view put forward by Benjamin Graham who proposed a 50/50 balance between equities and fixed interest securities (namely gilts, bonds etc). With an annual re-balancing exercise. This worked on the theory that the investments complemented each other so that when shares were going down the bonds were going up and vice versa.
For me it provides some diversification ensuring that I am not fully invested at any point in the boom and bust cycle (no Gordon you didn't solve it!), and gives me access to cash in times of personal need which gives me one less pressure to sell shares to raise funds. It is absolutely certain that shares will go up and down but if you invest every last penny of your savings in that first investment and your washing machine breaks down you can bet that your investment will be showing a loss if you "have" to sell.

So that's the first guideline I follow: maintain a balance between interest paying savings and my investment portfolio.

No comments:

Post a Comment