Four ways to massively improve performance in 2022
Wealthlander Active Investment Specialist
07 January 2022
We observe many investors with poor performance despite strong markets in the last few years. Here are some ideas to help you address this in 2022.
1. Acknowledge the reality of your performance to date
Acknowledging the reality of this means accepting you're not using the best investment approach out there and there are better investment options than you struggling to be your own portfolio manager - or relying on those who don't deliver and untrustworthy people or institutions that often charge fees for delivering ordinary returns. It means recognising that genuine expertise is worth finding and paying for and that it can add much more value and manage risk better than you have been doing.
2. Get rid of your under-performing broker or adviser
There is a big advantage to being invested in a fund where the fund is the only source of revenue for the firm. Firstly, the performance is clear, known, real and routinely calculated and produced by a third party, and secondly, the firm should only be remunerated by you the client and not have its main source of business being something that is using your money for some other benefit. Ideally there is a clear alignment with the firm's principals invested in the fund themselves and paid mainly on performance, and not for asset gathering through having large amounts of assets or large base management fees. That way, you actually have a much better chance of performing and can easily track your performance.
Some advisers are competent but many are not, and many trap their clients into convenient but perennially under-performing investment approaches. Few are out there looking how to do a better job for their clients by having them invested with the best boutique investment managers globally. Some invest their wholesale clients in the same assets as their retail clients for their own ease of business, when they should be invested differently to take advantage of all the benefits that wholesale investors have.
3. Think outside the square
4. Acknowledge the investment cycle
This means single digit returns from here are much more likely than double digit returns (at best). And that risk management is now much more important to reduce the increased risk of large losses if valuations revert to longer term averages or inflationary pressures persist forcing a tightening in central bank policies. Hence, it makes more sense to move to investment approaches with good prospective returns, better inflation protection, and much better protection from large losses than simply being long only and loaded with equity and property risk. In fact, locking in high returns by reducing equity and property investments in favour of alternative strategies means that the abnormal gains of the last few years become permanent capital gains, protecting your wealth against the risk of large losses from market falls.
Step 1: Measure your performance across your entire portfolio in 2021 and be honest with yourself. If you are in a position where some of your investments have delivered little then avoid hope as a strategy or being frozen or convinced into doing nothing. Cutting your losers is a good strategy.
Step 2: Assess the value that has been added by your current broker or adviser relationships and stop using under-performers as these relationships are meant to add value to your bottom line, otherwise you are paying them for nothing or for treating you as a fool. Many of us are mistakenly loyal to long held relationships with sweet talkers that simply aren't in our interests.
Step 3: Investigate alternative investment offers as there are many out there that are available to wholesale investors which better align with common investor objectives than traditional investment approaches.
Step 4: Consider the investment cycle and ask yourself is this an environment where you think you can realistically continue using the same approach to achieve your desired returns. If not then consider alternative approaches better suited to today's investment prospects and risks.
There are many simple things you can do to protect your hard-earned capital and still make money, even in a more adverse investment environment. Acknowledging the realities above is a crucial step in getting there.
Author Dr Jerome Lander, Founder and CIO
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