If you don’t know what strategy I’m talking about, it’s the ever popular buy-and-hold strategy. A strategy usually recommended by financial advisors.
The problem with the buy and hold approach is that it doesn’t factor in economic and political issues. By this I mean, you’re forced to hold your investments when there are unpredictable events that affect the market.
The graph below is just to illustrate how the buy-and-hold strategy has performed against my Real Wealth strategy over the last five years.
If you bought and held an exchange-traded fund that tracks the JSE Top 40 over the past five years, altogether, you would’ve turned R100,000 into only R146,885 by today.
You might think that’s reasonable, but it really isn’t.
On the other hand, using a unique strategy that uncovers individual quality shares (like the Real Wealth strategy) would’ve turned R100,000 into R479,857.
In other words, you would’ve made three times more than if you bought and held a JSE Top40 index tracker.
The thing is, the Real Wealth strategy doesn’t only identify companies that have high potential to make you money, it also makes sure your portfolio is protected.
Two techniques the Real Wealth strategy uses to improve portfolio performance
The benefit of managing your own investments is you can eliminate certain risks by using protection strategies like stop-losses and
position-sizing – two techniques Real Wealth implements.
You don’t want to waste precious time phoning your financial advisor asking him to set up
stop-losses and by that time, your stock would’ve fallen sharply.
So a good start is to set a 25% stop-loss and depending on your risk tolerance or markets, you move it up or down as you please.
One of biggest benefits of actively managing your own stock portfolio is that you don’t have to pay any costs or fees buying, selling and managing your portfolio.
Why?
Because you don’t have a financial advisor taking your money. So managing your own stock portfolio won’t only benefit your overall retirement income, you’ll also be saving vital cash by not using a financial advisor.
Now only you can make this decision and if you choose to manage your own stock portfolio, remember it takes time, patience and a lot of focus to become a master at it.
Always remember, knowledge brings you wealth,
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