FAQ: How often should I check my portfolio?

Once a quarter is enough. Paying too much attention to short-term volatility can easily cause you to lose sight of your long-term goals.

FAQ: How often should I rebalance my portfolio?

Once a year is a good rule of thumb, in normal market conditions. Some investors find it helpful to automate the decision and schedule a routine annual meeting with their relationship manager.

Occasionally, your portfolio will need to be rebalanced more often, for example, in case of large market moves that have significantly altered the portfolio’s composition (for example, strong equity performance over long periods of time will increase the equity weight in the portfolio). 

FAQ: I keep hearing the stock market is too expensive. Should I wait before investing?

In principle, no. Timing the market rarely works, and for long-term investors the benefit of a lower entry price could easily be outweighed by the opportunity cost of waiting. Instead, consider investing at regular intervals over the course of your life, so your cost price will be averaged out over time.

FAQ: What should I do in a market crash?

First, don’t panic. Successful investors are often distinguished by resilience in the face of fear. 

Second, avoid making rash decisions. Resist the immediate temptation to retreat into cash. It might feel like the safe option, but cutting your risk exposure after a crash often comes at a terrible cost – especially when there is no fundamental reason behind the downturn. In, that case, you should remain invested to benefit when the market rebounds. Remember, your default position is your strategic allocation, not cash, and accepting a degree of risk and volatility is at the heart of any successful investment strategy.

Third, carefully consider whether the crash is an over-reaction to the news. If so, it may be a good opportunity to invest more. Be aware, however, that investing more in an asset when it declines significantly in price – so-called ‘averaging down’ – may simply result in you having a larger share of a losing investment. Averaging down only works when the price falls are unjustified.

FAQ: How do I mitigate the impact of my emotions when it comes to investing?

The difficulty often comes when your performance is much better or much worse than you expected. When things go too well, confidence can turn to greed, causing you to over-invest or become complacent. One way of protecting yourself from these instincts is to impose rules and parameters from the outset. Consider setting limits on how much to invest and when to do it. And, when you feel tempted to invest after a winning streak, re-read your own rules, and hold yourself accountable. 

Fear and uncertainty can be just as dangerous, so when markets move against you, hold your nerve. But try not to deny how you feel. It is normal to become unsettled when the value of your portfolio tumbles. 

These are important times to recall your goals and to remember the importance of keeping a long-term outlook. And remember, what can feel seismic in the heat of the moment often proves to be less significant in the long run. 

In either scenario, having an appropriate investment strategy provides a vital framework to manage your emotions. The key is having the discipline to stick to it. 

FAQ: How much cash should I have in my portfolio? 

Your objective as an investor is to get the maximum possible return without exceeding your personal risk appetite. We believe the best way of doing this is to remain fully invested across a range of asset classes, maintaining a cash weight of approximately 2 or 3 years of cash needs for liquidity purposes, and to take advantage of new investment opportunities.

Investors who are particularly risk-averse, and those with an imminent need for funds – retirees or those planning to buy a house, for example – should expect to hold a greater proportion of cash as a core portfolio holding. 

If you begin to feel an urge to hold more cash than first envisaged, it could be a sign that you have over-committed. Your portfolio of investments might be too large a share of your overall wealth, and/or you might feel that you are taking too much risk. In either case, you might want to speak to a professional for insights. 

FAQ: How much money should I invest?

Rather than this being an isolated decision, the correct amount to invest is whatever is necessary to achieve your investment objectives. You should invest at least enough to hit your target return by the end of your time horizon. Underinvesting may be a lesser-known risk, but the dangers of coming up short are real. 

At the other end of the scale, investing too much can be a cause of stress and might force you to sell at a depressed price if you have an urgent need for cash. You could miss substantial returns as a result.

Between these two extremes, it is largely a matter of personal choice. You should invest enough for the result to be significant, but not so much that you lose sleep. 

For more frequently asked questions and further insights, get the guide now.