49. The three best investment advice you can give your clients

There is no "free lunch" in investments! the returns that we are getting is simply the reward of the "investment risk" that we took, does this mean that conservative investors making careful choices have no chance of earning a decent return?

Risk is an aspect of investing that we can minimize without sacrificing most of the returns by applying the following principles:

1. Diversify - a client gave you 100,000 as initial investment for his retirement goal twenty years from now, is it a good idea to place 100% of this in an equity fund? as most charts and studies shows a long term upward bias for the stock market, the client should do well.. 

this is one of my early mistakes - having full faith that over the long term, stock prices should go up adapting the "Buy and Hold" strategy recommended by master warren b, While experience shows this happens most of the time, I discovered that markets does not go up in a straight line, but in a series of upward oscillations

for conservative investors, a 60/40 split between stocks and bonds will make the most sense

2. Time in the market - most funds (equity, bonds etc) are designed to capture long term returns, maybe the fund manager at certain times may take on some opportunistic trade, the general investment horizon of stocks in the portfolio is anchored on long term growth, it follows that money intended for day-to-day expenses should not be placed in an investment fund because of the mismatch of tenor, to maximize returns, give it time to grow

3. Review and Re-balance - Regularly! the initial 60/40 ratio will change as market conditions changed, there is a 50/50 probability that it can go up or down in the next six months, in order to keep the risk profile of the investment it is advisable to do periodic reviews (best every 6 months), this is to keep it within an acceptable risk position without giving up most of the expected return

see post #40 on how to re-balance and #8 on how to conduct a portfolio review conversation

all the best in 2022 my friends!