We are advocates of investment portfolio strategies.

For many clients we look after the majority of their wealth and their requirements are broadly similar – to produce steady returns without taking outlandish risks. Effectively we act as the steady ship whatever the weather, encouraging clients to stay the course.

The portfolios are ideal for this because the assets are globally diversified. We are not trying to guess what regions will do well next year, because the ‘so called’ experts get this wrong and we are consistent in selling winners to buy losers; a strategy which over time is proven to win.

The problem is that this is not sexy.

2000, 2008, 2011, 2013, 2015

These dates are significant.

In 2000 and 2008 the markets plummeted and it will be a brave person who stands up and says that they didn’t panic. In fact, many people have forgotten how they behaved; perhaps omitting irrational selling and recouping of losses and losing sight of their investment strategy.

2011 and 2013 are similar for various reasons. In 2011 the markets plummeted on the back of potential debt defaults in Europe. Those portfolios weighted to low risk assets like bonds did measurably better than equity portfolios and had done for 3 years plus. Investors seeing this were tempted to switch away from the higher risk strategy to the lower risk strategy on the assumption that the better returns would come from this route.

However, over the last two years including 2013 it was those higher risk, equity based strategies which have delivered stronger returns. In reverse we now see those people in the cautious strategies thinking they need to climb the risk scale to chase the higher returns.

2015 is significant because we don’t know what 2014 will bring.

The biggest mistake we can make as humans is to erase the past – however we are naturally attuned to do that. If we constantly flit between strategies based on last year’s performance we will get it wrong.


The expected strong markets like Japan, Europe etc have been the weakest. Emerging market debt, global bonds, emerging markets and Asia have been some of the strongest sectors. Even Japan which suffered heavy losses in the first quarter has seen this reverse with other developed markets being fairly flat.

The challenge for investors is that it has been easy to make money over the last five years because many quality investments where cheap. This is no longer the case, and if we apply the theory of the last five years then we will be constantly chasing our tails basing investment decisions on the past.

The reason portfolios are proven to work is that they ignore all of the hype and sail a steady ship through choppy waters. The strategies will reflect the risk or volatility a client is prepared to accept and the return will aim to match that.

There are no irrational decisions or educated guesses; it is a slow albeit dull strategy that is proven to wok over the long term.

Can investors do their own things?

For us we don’t look to control all the assets; clients often will manage a small proportion of money themselves. Often this will be held in shares but the reality is that the same principles apply with this as the portfolios. If an investor seeks gold in an IPO they should be asking “does this match my tolerance to risk?”

Some of the recent IPOs have hit highs only to fall back 40% plus. Most investors would find that very hard to stomach.

Memory loss

Investment portfolio strategies are far from sexy but what they do is match an individual’s tolerance to risk and then aim to deliver a return consistent with that. There will be periods where the markets favour equities to bonds and there will be periods where developed markets favour emerging markets and vice versa.

The portfolios will never try to guess this but over time they will provide a steady return and ignore the hype and bluster that is happening around them.

NOTE: This is written in a personal capacity and reflects the view of the author. It does not necessarily reflect the view of LWM Consultants. The post has been checked and approved to ensure that it is both accurate and not misleading. However, this is a blog and the reader should accept that by its very nature many of the points are subjective and opinions of the author. This is not a recommendation to buy any product or service including any share or fund mentioned. Individuals wishing to buy any product or service as a result of this blog must seek advice or carry out their own research before making any decision, the author will not be held liable for decisions made as a result of this blog (particularly where no advice has been sought). Investors should also note that past performance is not a guide to future performance and investments can fall as well as rise.