Review and re-balance: the key to share success
Question : I’ve noticed that the FTSE is operating at a current high, despite the recession. Should I be looking to invest more in shares or share-linked investments?
Stephen Hill, senior partner with S Hill & Co Investment Advisors, replies:
Answer: Traditionally it can be seen that the FTSE, or any share index, runs six to nine months ahead of the economy and it’s true that the FTSE closed on a two and a half year high for 2010.
Also last year the main FTSE 100 index rose a credible 10%.
However the mid-cap index, the FTSE 250, returned 25% up as mid and small cap firms often offer more opportunities in times of economic recovery.
Investors will be encouraged to see this as it has undoubtedly had an impact on any share-linked funds or pensions that they contribute too.
The main question now to consider is if this trend will continue for 2011 and what markets are likely to perform better?
As to the future, as always our investment advice is based upon an individual’s objectives, timescales and their attitude to risk.
The key to this is a suitably diversified investment portfolio that is regularly reviewed and re-balanced.
Building a portfolio is a question of managing risk versus return. Focusing on ‘flavour of the moment’ funds or stocks is a high-risk approach only suitable for sophisticated investors.
A diversified portfolio reduces risk and spreads investments across the key asset classes and geographic areas. However, the important factor that many investors forget is to regularly have their portfolio re-balanced.
I would advise you to review your current share portfolio with the advice of a professional advisor.