A good strategy curbs risk & helps investors weather storms.
All good investment portfolios are built on strategies that best serve an investor’s goals and risk tolerances, says Sandra Quemba, Craigs Investment Partners investment adviser.
Setting a strategy involves more than choosing a diversified portfolio of investments. It’s a plan of action tailored to the individual for the good times and hard times, she says. It’s consistent and disciplined, manages risk, focuses on the time horizon, ensures that investments are suitably diversified, and adapts to market changes.
A great example of the importance of having a strategy, not just investments, was the Covid ‘crash’ between February 20 and April 7, 2020. Quemba says while the world panicked and some people made impulsive decisions, Craigs’ advisers, backed by their research team and investment committee, really earned their keep.
“We didn’t have a crystal ball, but the message was to stay calm, be rational, hold the defensive line, stick to the strategy unless your circumstances have changed, and lean on your adviser for support,” she says. It worked.
Whether it’s 2020 or 2022, when markets looked uncertain, or during the next volatile period, Craigs always helps clients pick investments based on their fundamentals and their alignment with each client’s objectives.
“Volatility comes and goes, but great businesses remain resilient,” Quemba says. While investors might see a market fall as risky, an expert adviser could view that as an opportunity.
During turbulent times, good advisers work to rebalance individual client portfolios to ensure the allocation between cash, fixed interest and growth assets is appropriate and remains in line with the investment strategy.
Sticking to a strategy and rebalancing in good times also has its benefits, says Quemba. As share prices soar, so does an investor’s weighting to a company or sector, and with it the risk of losing should market sentiment change.
“Investors may be reluctant to reduce their holdings, but it’s about managing risk and reward and sticking to the investment strategy.”
Another example where the importance of an investment strategy might shine through is avoiding situations where investors who think cashing up their KiwiSaver and other investments at age 65 in favour of term deposits is “safe” – only to find that inflation eats away the capital. An adviser can assist with a strategy that keeps a portion of investments in growth assets to avoid that risk.
Risk is more than just volatility (i.e. the rise and fall of asset prices). It also relates to an individual not being able to meet their wants and needs, in other words, their investment objectives. Quemba says Craigs helps its clients develop investment strategies that manage all of these risks so that they are able to meet their investment goals.
It’s not just market and longevity risks that Craigs builds into clients’ strategies. Individuals have employment, health requirements, family obligations, dreams and more. “We can translate those into investment goals for clients.”
Starting the journey with expert investment advice is as simple as picking up the phone, calling Craigs and asking to speak with an adviser, says Quemba. There is no cost and no commitment until you are comfortable and ready to press go on becoming a Craigs client.
Disclaimer: Sandra Quemba is an investment adviser at Craigs Investment Partners. Her disclosure statement is available on request and free of charge. This information is general in nature and should not be regarded as specific investment advice. Craigs Investment Partners do not accept liability for the results of any actions taken or not taken upon the basis of this information, or for any negligent misstatements, errors or omissions. Craigs Investment Partners recommend seeking advice from a financial adviser about your financial situation and goals before acquiring a financial product or making any investment decision. To talk to one of Craigs’ financial advisers, please call 0800 272 442. The Craigs Investment Partners Limited Financial Advice Provider Disclosure Statement can be viewed at craigsip.com/tcs. Visit craigsip.com.