Overcoming DIY investing

PORTFOLIO: SOME AREAS WHERE INVESTORS (AND SOME ADVISORS) GET IT WRONG

- Marius Fenwick

I regularly get approached by "do-it-yourself" investors, many of whom come from the Moneyweb community. Most want verification or confirmation that they are on the right path, but many want more specific advice on fund selection and strategic tax planning.

The biggest challenge that do-it-yourself investors have is to stay on top of legislation and to remain informed of changes to investment teams, taxes, new funds, and up-to-date data and strategies provided by the analysts of the respective investment houses.

Today, I want to highlight 7 of the main areas where do-it-yourself investors (and some advisors) get it wrong.

1. Too many funds are held in a single investment

I get the impression every time there is a marketing campaign for a new fund, many people invest in it. Using uncorrelated funds makes sense. It reduces volatility and should provide a decent outcome, but there should be a clear strategy behind the fund selection.

Using, for instance, funds with different mandates in the same portfolio distorts the objective of each fund. Using a combination of a stable fund, a medium equity fund, a balanced fund and an equity fund from the same fund manager leads to a "bastardised" portfolio.

2. No clear investment strategy