The only four equity portfolios

Once you have dealt with the basics of identifying that

a) equity investments are necessary to protect retirement income from the ever-rising cost of living; and

b) diversification is essential to avoid permanent losses

you can see that there are really only four ways to manage that equity portfolio, as shown in the diagram below.

1) You can  run the portfolio yourself (without the advice or cost of a professional financial advisor) in one or more passive equity indexes, wherein the investments are not selected by money managers but rather are constructed to broadly represent  specific market areas.

2) You can run the portfolio yourself and choose from among the many active money managers.

3) You can invest in a portfolio of passive indexes with the advice of an advisor to help you with behaviour management to avoid the very common and costly mistakes as well as comprehensive financial planning.

4) You can invest in a portfolio of actively managed investments with the help of an advisor.

There is a continuing debate about active versus passive investing, but I will leave this alone for the moment as I believe it is of relatively little significance.  No one can say for sure whether 1) will outperform 2) or 3) will beat 4).  There is, however, overwhelming evidence that choices 3) or 4) built and managed with the help of the few advisors who do what I do will be more successful than one you try to manage yourself.  No one has much, if any, control over how investments perform but we do have great control over how an individual investor behaves, and this is of far greater significance as shown repeatedly by research.

The past few years, not to mention the last couple of decades, has been filled with excuses to panic out of equities and in fact most people have participated in just this type of activity but my clients did not.  Successful equity investing requires above all the virtues of patience and persistence and these are entirely behavior management issues, not financial forecasting techniques.

If you have not already done so, please recognize that the true value of a financial advisor does not come from promises to pick superior investments or to forecast investment markets since these are unknowable; it comes from comprehensive financial planning to address the major issues in your life, and caring, behavioural investment advice to help you stay on the right path when it is very hard to do.