Embrace Market Pricing
The market is an effective, information-processing machine. Millions of participants buy and sell securities in the world markets every day, and the real-time information they bring helps set prices.
Don’t Try to Outguess the Market
The market’s pricing power works against mutual fund managers who try to outsmart other participants portfolio management through stock picking or market timing. As evidence, only 17% of US equity mutual funds have survived and outperformed their benchmarks over the past 15 years.
Resist Chasing Past Performance
Some investors select mutual funds based on past returns. However, funds that have outperformed in the past do not always persist as winners. Past performance alone provides little insight into a fund’s ability to outperform in the future.
Let the Markets Work for You
The financial markets have rewarded long-term investors portfolio management. People expect a positive return on the capital they supply and, historically, the equity and bond markets have provided growth of wealth that has more than offset inflation.
Consider the Drivers of Return
Academic research has identified these equity and fixed income dimensions, which point to differences in expected returns. These portfolio management dimensions are pervasive, persistent, and robust and can be pursued in cost-effective portfolios.
Practice Smart Diversification
Diversification helps reduce risks that have no expected return, but diversifying within your home market is not enough. Portfolio management with global diversification can broaden your investment universe.
Avoid Market Timing
You never know which market segments will outperform from year to year. By holding a globally diversified portfolio, investors are well positioned to seek returns wherever they occur.
Manage Your Emotions
Many people struggle to separate their emotions from investing. Markets go up and down. Reacting to current market conditions may lead to making poor portfolio management investment decisions at the worst times.
Look Beyond the Headlines
Daily market news and commentary can challenge your portfolio management investment discipline. Some messages stir anxiety about the future while others tempt you to chase the latest investment fad.
When tested, consider the source and maintain a long-term perspective.
Focus on What You Can Control
A financial advisor can create a portfolio management plan tailored to your personal financial needs while helping you focus on actions that add value. This can lead to a better investment experience.