Consistency… the Unsung Hero of Investment Management
Behind the award
Last year we won the Citywire 2023 DFM of the Year Award. This was a wonderful achievement celebrating our overall DFM proposition but also the excellent investment performance of our solutions. The big surprise about the award was there were 11 categories – four for service and seven for performance – and we only won one of those categories – best performance in the ASISA Medium Equity Category.
So how did we win the DFM of the year? Well, the answer is quite simple, it was consistency.
We were the only DFM to be nominated in every single category – and a little birdie mentioned that we came second in every other category. As a result, our overall score was superior to that of any other DFM that partook because of our consistency. We are very pleased with the award and once again realised how important consistency is across a complete DFM offering.
The glue that holds your portfolio together
Imagine your investment portfolio as a delicious pizza. You have a crust (which is your long-term goals), your sauce (your asset allocation), and a variety of toppings (the underlying asset managers). Now, imagine trying to make this pizza while constantly changing the ingredients, the cooking temperature, and even the recipe itself. You would probably end up with something resembling a culinary disaster.
That is precisely why consistency is the unsung hero of investment management. It is the glue that holds the portfolio together, the steady hand that guides you through market ups and the market downs, and it is the secret ingredient to long-term success. Think about it this way, would you trust a pilot who changes their flight plan every time the wind changed direction slightly? Of course not! You want someone who is methodical, disciplined, and sticks to the course. Investing is no different.
The secret ‘sauce’ of successful investing
It reduces emotional investing
Markets are fickle beasts, prone to sudden bursts of enthusiasm and moments of utter despair. If you reacted to every headline and market blip, you would end up making impulsive decisions that could hurt your portfolio in the long run. Consistency helps you stay calm and rational, allowing you to ride out the inevitable storms and remain focused on your long-term goals.
It develops discipline
Investing is not a get-rich-quick scheme. It is a marathon, not a sprint. Consistency helps you to develop the discipline needed to stick to your investment plan, even when it is tempting to stray. This means saving regularly, rebalancing your portfolio as needed, and avoiding emotional decisions that could derail your progress.
It allows for compounding
The power of compounding is like a magic trick – start small, reinvest your returns, and watch your money grow exponentially over time. But this magic only works if you are consistent. Imagine planting a seed and then digging it up every few days to check if it is growing. Not very productive, is it? Consistency in investing allows the seeds of your wealth to flourish, reaping the benefits of compounding over the long run.
It simplifies decision-making
Having a consistent investment strategy means you do not have to constantly analyse every new investment opportunity. You have already established your criteria, your risk tolerance, and your long-term goals. This makes it easier to quickly evaluate potential investments and make informed decisions that align with your overall plan.
It builds trust
Whether you are working with a DFM or not, consistency builds trust. It shows commitment to your goals and willingness to make informed decisions. This can be particularly important when facing market volatility or making crucial investment choices.
“Consistency is the true foundation of trust”
– Roy T. Bennett
Consistency does not mean rigidity
As your client’s life circumstances and goals change, you may need to adjust their investment strategy accordingly. But even then, making thoughtful, deliberate changes based on careful analysis is crucial.
So, how can you cultivate consistency in your client’s investment journey? Here are a few tips:
Develop a clear investment plan
Define their goals, risk tolerance, and investment time horizon. This will serve as your roadmap for navigating the markets.
Set up automatic contributions if they can afford to
This will help you save and invest consistently, even when they are busy.
Review portfolios regularly
Rebalancing your portfolio as needed ensures it remains aligned with your goals and risk tolerance.
Seek professional advice
Each of the steps above can be made a lot easier if you select a DFM that can take care of the investment management on behalf of you and your client and can provide personalised guidance and support.
Remember, consistency is not about being perfect. It is about making a conscious effort to follow your investment plan and avoid impulsive decisions. Even small steps taken consistently can lead to significant results over time.
Hence, stay the course, stay disciplined and watch your client’s wealth grow over the years.
- Consistency rewarded – we won the DFM award for the year.
- Demonstrating consistency helps investors to develop investment
discipline and builds trust.
- Several tips can nurture consistency in your investor journey, including
using a reputable DFM.