Slay investment myths

PRINCIPLES: SIX TIPS TO HELP INVESTORS BUILD A GOOD PORTFOLIO

Expert believes we are our own worst enemies.

inflation, while cash lost purchasing power. Between 1972 and 2017, local cash investors would have received a 1.5% per annum after-inflation return, equity investors 8.6%. It would have taken cash investors roughly 50 years to double their money and about eight years for equity investors.

2. Building effective portfolios means effective diversification

For almost all investors, a multi-asset portfolio is the most effective way to manage risk, Saville said. “All you have to do is build a portfolio 50:50 of [bonds and equities] and you halve the bumpiness. What we know from compounding results is that if you can moderate the drawdown, the compounding on the upside becomes far more powerful.”

3. Don’t beat market, match it

Every self-respecting active manager will tell investors they have an investment process and philosophy that can beat the market. “Certainly, Cannon has one, and we’ve demonstrated that in our portfolios over long periods, but does that mean that all of your money should be in that active solution?” He argues no: if all your money is there, there’s a good chance when you need it most it’ll be behind the pace. Over 10-, 15- and 20-year periods, most active managers are behind the market.

4. Costs matter

“If you want to tip the odds in