Play Ball: Creating a ‘Winning Portfolio’

Do you remember your high school days of playing money football?  A small coin was the ball and each person had one player, a larger coin. The player would be hit with a fudge stick, to score on the opponent. That single player was defender, midfielder and forward.  Some of us use one player in our investment strategy, for example cash or stocks, much the way we play in money football, and expect it to play multiple roles in our portfolios.  However, your investments will work better for you if, like the real game of football, you have several players positioned in their right role.

Player Selection
Defenders, including goalkeeper (cash type instruments): These assets protect your portfolio from going into debt or having to sell investments to meet the challenge of expected or unforeseen expenses.   
Midfielders (bonds and preference shares etc.): These ‘players’ add stability to your portfolio.  Depending on the environment, you can use them as defenders, (since they give you income stream), or forwards (because they can be sold for a profit).
Forwards (ordinary stocks, unit trusts etc.):  These investments are potentially high yielding and their objective is to score goals by boosting your portfolio 
 

Positioning Players
An excellent player in the wrong position can cost you the game.  So, as your financial coach, JMMB suggests making some substitutions.
Bolster with Forwards and Midfielders
If you have a strong defence, that is, most of your portfolio is in cash, but no forwards and midfielders, you can only play a defensive game.  The best result that this ultra-conservative portfolio can yield, is a draw.  The portfolio will do its job of ensuring that you have enough cash to defend against ‘attacking expenses’; but will be ineffective at outperforming inflation and other opponents to give you victory.  Therefore, to advance in the game, JMMB would recommend that you include strong midfield support (a variety of bonds and preference shares) and great forwards (equities and unit trusts).  Remember, defenders rarely move you forward.

Tighten Your Defence
If you have a portfolio with strong forwards your probability of scoring is great.   However, without cash, you are likely to sell a great equity investment to deal with a financial emergency.   To avoid this, you should bolster your midfield (with income generating bonds) and defence (with cash); because it would be chaotic to use a lead forward, like Lionel Messi, as your goal keeper!

Are you playing money football with your investments?  Do you need to make some substitutions, so that you can celebrate a ‘winning portfolio’? Call (876) 998-JMMB (5662) to get started.  

 

Written by: Michelle Sinclair Doyley, Manager, Client Financial Education, JMMB Group