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Investing

MANY INVESTORS ARE UNEASY, BUT THEY CAN STILL GROW WEALTH WITH THESE TWO RULES

MANY INVESTORS ARE UNEASY, BUT THEY CAN STILL GROW WEALTH WITH THESE TWO RULES

Many investors are currently uneasy, but there is abundant opportunity for investors to build wealth if they live by two key rules: continue to drip-feed new money into the markets and properly diversify portfolios.

 This message from Nigel Green, founder and chief executive of deVere Group, which has more than $10bn under advice, comes as investors hang off every utterance made by the Federal Reserve committee as interest rates are expected to soon rise, amid ongoing concerns over the impact of Brexit, and against a backdrop of overheated equities, unstable oil prices, the forthcoming U.S. presidential election, unusual central bank policies in many developed countries, the economic slowdown in China, and international security threats, amongst other factors.

 Mr Green says: “Many return-hungry investors are having a bad time of it at the moment. They will tell you that decent returns are hard to come by.  Global growth isn’t what it was. And that storm clouds are brewing on the horizon due to potentially seismic geopolitical factors that will impact markets.  They are viewing this period of relatively low market volatility as ‘the calm before the storm’.

 “This downbeat sentiment is fuelled by analysts, economists, politicians and media commentators who are all contradicting each other.

 “But it is just that – sentiment. All too often the fundamentals are being overlooked.

 He continues: “There are two key rules by which investors should live in order to accumulate wealth.

 “First, they must continue to drip-feed new money into the markets at a steady and pre-established pace.  They shouldn’t withdraw from investing.

 “History shows that over the longer-term stocks go up.  As such, if investors are serious about growing wealth over the next ten years they must carry on putting new money to work.  Just sitting back and waiting to see what happens is not an option if you want to achieve this aim.

 “By contributing extra money to portfolios now, rather than putting it off, investors are able to capitalise on the potential gains of the longer-term stock market projections sooner rather than later.  Putting off investing means the exact opposite, of course.

 “Also, not all stocks are currently overvalued.  Due to Brexit for example, there are lots of high quality equities at very attractive prices.  If investors proceed with caution and are extremely selective, there’s plenty of buying opportunities to be found in order to build wealth.”

 He goes on to say: “Second is to ensure that portfolios are properly diversified.

 “All too often investors think their portfolios are adequately diversified when they’re not.

 “No one asset class, sector or region wins all the time, therefore in order to mitigate risk and benefit from opportunities, investors need to spread their funds around.

 “Markets work in cycles and when one asset class, sector or region is up, others are going down.  The aim is to minimise exposure to one class, so that if that class is not performing well, the others are holding up the portfolio and keeping your investment objectives on track.”

 Mr Green concludes: “Despite the general sense of unease in the markets, by drip-feeding new money into the markets at a steady pace and ensuring portfolios are truly diversified, investors can still build wealth.

 “It is a matter of proceeding with caution and being highly selective.”

Global Banking & Finance Review

 

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