Is your portfolio budding too?

Honestly, if you had to start all over again by investing the value of the portfolio you have today, would you do exactly the same? Or is your portfolio a bit haphazard?

This is true for many.

Maybe it's time to make an investment plan?

As an investor, you've probably asked yourself questions like:

What is the best asset mix in terms of asset classes such as stocks, bonds, cash, private equity, real estate, forestry, etc. And how do you get there?

Over the years, economists have calculated what provides the best risk-adjusted return by combining different asset classes. These theoretical calculations are difficult to translate into concrete action as an investor.

At Assure and Assure Fondsmæglerselskab, we see this picture confirmed on a daily basis.

Among our customers, the tendency is that the greater the wealth, the more money is placed in unlisted investments and alternatives, such as real estate and private equity, rather than listed stocks and bonds.

There are probably several reasons for this. Higher expected returns and minimum deposits for alternative investments are probably part of the explanation.

A good return starts with a good plan

Most investors benefit from a written investment plan with overall goals and objectives. The plan can provide both peace of mind and higher returns. One example is to invest two-thirds of your assets - or even half of your assets - in listed stocks and bonds and the rest in alternatives - see illustrative examples in the graphic below.

The plan should be a single page with thoughts on allocation to different asset classes, return expectations, which part of the investment strategy is active or index-based, and whether managers are regularly changed based on performance.

The portfolio is budding

While practically speaking, investing in listed securities is easily accessible, the alternatives are somewhat more difficult. Investing directly in real estate is a good example of a transaction that can take time to both source and negotiate terms.

'Good deals' in assets such as real estate, private equity, wind turbines or companies that you believe have high growth potential and are in the market to raise capital, occur throughout life. For example, through acquaintances or business relationships.

We recently talked about this with a customer. The conversation turned to what characterizes his portfolio.

"I guess you could say I have a sort of budding portfolio," was the customer's apt assessment.

Over the decades, he has invested directly in various small companies, private debt, housing projects, private equity funds and, of course, listed stocks and bonds.

Subsequently, the customer decided that no more money should be invested in alternatives, as there were enough of them in the portfolio.

How would you invest if you had to start from scratch?

Over the course of a lifetime, the composition of your assets will grow based on ideas you have about sectors or companies in the stock market, as well as other investment opportunities that arise. Ask yourself, would you buy your entire portfolio again if you had all your money in cash?

In my opinion, the best wealth composition is therefore embodied in a plan that most of the time fits your wishes and that you can stick to through thick and thin. Of course, the plan is adjusted along the way and includes the flexibility to allow your wealth to grow - in moderation - so that the proportions in the individual assets and asset classes vary. Because when the good deals are there, a good merchant should strike!

With Assure's merger with Assure Fondsmæglerselskab, we help you make long-term investment plans and execute them, and you're welcome to get in touch with us.