Steady pace suits

The Scotsman - - Farming -

EAch of our IFA of the Year hope­fuls started the com­pe­ti­tion in mid-Fe­bru­ary with £300,000 to in­vest on be­half of our case-study cou­ple, chris and Fiona An­der­son. Six months down the line, their in­vest­ment port­fo­lios have been ex­posed to a great deal of volatil­ity and all the un­cer­tainty that sur­rounds a po­ten­tial “dou­ble-dip” re­ces­sion or a rag­ing bull mar­ket.

I am obliged to point out, as a judge, that the fi­nal re­sult of the com­pe­ti­tion will not be de­ter­mined en­tirely on in­vest­ment per­for­mance. At the out­set, our com­peti­tors were obliged to sub­mit an in­vest­ment re­port which will be used along with their port­fo­lio man­age­ment skills and their in­vest­ment com­men­taries to de­ter­mine the fi­nal out­come – for­tu­nately we have un­til the 31 De­cem­ber to make that fi­nal de­ci­sion.

Look­ing at in­vest­ment per­for­mance in iso­la­tion, there is al­most a 7 per cent dif­fer­ence be­tween the best and worst port­fo­lio per­for­mance – in mon­e­tary terms that’s a whop­ping £21,000 – so what’s made the dif­fer­ence? Well, yet again this com­pe­ti­tion is a good les­son in ef­fec­tive port­fo­lio man­age­ment and the key ques­tion for our com­peti­tors and all po­ten­tial in­vestors is “what poses the big­ger threat to in­vest­ment mar­kets in the medium-term – de­fla­tion or in­fla­tion?” The an­swer will de­ter­mine just how our IFAs ap­proach their as­set al­lo­ca­tion calls. As­sum­ing their clients are still com­fort­able with their “spec­u­la­tive” at­ti­tude to risk, should they stick with their orig­i­nal as­set al­lo­ca­tion, or are there some short-term tac­ti­cal changes that could be made?

Most in­vest­ment pro­fes­sion­als still be­lieve the mantra about in­vest­ing for the long-term but, in re­cent times, the capri­cious na­ture of in­vest­ment pat­terns from some in­vestors shows this be­lief is be­gin­ning to be ques­tioned. The re­al­ity is that few

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