Offense or Defense?
Strategies for Your Investment Portfolio
Kelly Campbell, CF , ChFC, AIF Founder of Campbell Wealth Management, Inc.
Just like any sport, you really have to think about wheth- er you are attacking or defending. Both require very dif- ferent actions. You can have a great defensive position but never score a point or you can have the best offense but get outscored by your opponent. Investing in the market re- quires the same strategies.
Next, you should give your manager more flexibility to make decisions. Don’t tie your manager’s hands together by only al- lowing them to buy stocks and hold them; instead, look for funds that allow them to buy and hold ‘long’ and sell ‘short.’ That way they have more options and can potentially make money even when the market is down.
The problem is that most investors only focus on trying to in- crease the size of their account. And if you think about it, this makes sense. If your accounts go up, then you win. But as we have all seen, that is not always the case. As a matter of fact, in the last few years, it has been increasingly difficult to hold on to those gains.
Next, look for managers that are of the highest quality... and have been consistently. The managers that have always been in the top of their peer group year after year have a proven track record and often times remain at the top. So choose those best managers, but then always keep tabs on their per- formance in accordance with their competition. This is very im- portant. If they start to falter, don’t be afraid to replace them.
So how do you maintain a winning strategy while also protect- ing what you’ve earned? Adding diversity is one method. The more investments you add to your portfolio, the better off you will be, risk-wise. I am not talking about simply having more investments in your account, but having investments that are not correlated to one another. Choosing investments that move in different directions and do not rely on one another regarding their performance is key.
Finally, remain active in your decision making. In other words, don’t just set it and forget it. Work on it, look at it, and moni- tor it. So many people think they can just make some changes and never review the account again. You wouldn’t bet on your favorite team that way. So if you haven’t considered your of- fensive and defensive tactics, maybe it is time to rewrite your playbook. Good luck and happy investing! <
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