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A Fin24 user experienced a loss on his investment portfolio. He writes:
My portfolio has been reversed from an overall profit of 20% to an overall loss of 3% in the space of two months.
What is the best strategy to take with my portfolio?
Do I draw a line in the sand at a nominal loss (say 5% overall loss) and sell out of all my positions, wait for the economy to start stabilising and then re-enter the market, or is it best to ride it out?
If riding it out is the way to go, then how far do I ride it? Who knows where the bottom might be.
Fundamentally I believe all the companies I'm invested in are solid, but the general local and global economies are on such a downward spiral at the moment that my portfolio is taking a knock.
I’d really appreciate your thoughts.
Jean Minnaar, head of investment and savings solutions at Old Mutual, responds:
As an investor it’s often inadvisable to base asset allocation decisions on short-term considerations or emotions.
Regular trading can destroy value, especially if your actual intentions remain invested over the long term.
Also, trying to time the market has often been proven to be mostly unsuccessful.
That said, guidance needs to be tailored to your own situation and not just in line with general wisdom.
If your investment horizon is 40 years, then the answer might be very different to the reasoning that will be followed if it’s six months.
Therefore, you need to take into consideration why you have decided to invest this money in equities and how it fits into your financial plan.
Even the best analysts and advisers will not be able to consistently predict the general direction in markets, but a good adviser can play a vital role in making sure that you develop strategies suited to your own situation.
This often takes away the need to worry about short-term fluctuation and focuses on the long term.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.
Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.
My portfolio has been reversed from an overall profit of 20% to an overall loss of 3% in the space of two months.
What is the best strategy to take with my portfolio?
Do I draw a line in the sand at a nominal loss (say 5% overall loss) and sell out of all my positions, wait for the economy to start stabilising and then re-enter the market, or is it best to ride it out?
If riding it out is the way to go, then how far do I ride it? Who knows where the bottom might be.
Fundamentally I believe all the companies I'm invested in are solid, but the general local and global economies are on such a downward spiral at the moment that my portfolio is taking a knock.
I’d really appreciate your thoughts.
Jean Minnaar, head of investment and savings solutions at Old Mutual, responds:
As an investor it’s often inadvisable to base asset allocation decisions on short-term considerations or emotions.
Regular trading can destroy value, especially if your actual intentions remain invested over the long term.
Also, trying to time the market has often been proven to be mostly unsuccessful.
That said, guidance needs to be tailored to your own situation and not just in line with general wisdom.
If your investment horizon is 40 years, then the answer might be very different to the reasoning that will be followed if it’s six months.
Therefore, you need to take into consideration why you have decided to invest this money in equities and how it fits into your financial plan.
Even the best analysts and advisers will not be able to consistently predict the general direction in markets, but a good adviser can play a vital role in making sure that you develop strategies suited to your own situation.
This often takes away the need to worry about short-term fluctuation and focuses on the long term.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.
Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.
