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10 Important Considerations To Invest Efficiently

Topic: Investor Insights Editors Picks 16 May 2023

Below are the 10 most important points you need to consider as an investor, if you feel you need help to improve your investment portfolio, please book a no obligation call with our advice team.

 

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1. Get Advice From A Whole of Market Firm (Not restricted)

If you are currently invested with a restricted advice firm, then there will be significant room for improvement in your portfolio.

It is not possible to provide clients with the best options without access to the majority of funds on the market. Performance is not a guarantee of future returns, but you need the flexibility to invest in funds and fund managers that have a transparent track record of performing in the top 25% of their specific investment sector or asset class. Achieving top 25% position is not a lot to ask, but is one of the first filters we apply to the 1,000's of funds available to our clients. Many investors are unaware that they are invested in funds that rank in the worst 25% of their sector.

We are a whole of market regulated firm, not restricted.

 

2. Performance - Our Portfolios Versus Competitors

For the most part, our portfolios have outperformed our competitors over recent years. We have 10 main portfolios and 10 ESG (ethical) portfolios to suit clients' various risk profiles and ethical needs. Our asset allocation models are reviewed regularly as well as the fund managers within our portfolios. Our research and processes have paid off for our clients and we have had to make very little changes to our portfolios over recent years.

 

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3. Government Financial Services Compensation Scheme (FSCS)

Many investors are not aware that investment funds are also protected by the Governments Financial Services Compensation Scheme to a maximum value of £85,000. Our aim is to maximise client protection by diversifying across multiple fund managers. For example £85,000 invested across 10 providers or fund management brands would increase your protection to £850,000.

Maximising Protection Under the Financial Services Compensation Scheme is available to most investors, however many investors are unaware they are not protected, especially those that are with a restricted provider such as St James's Place or some of the larger known insurance companies. The Financial Services Compensation scheme administered by the Government allows you to enter your details to identify what level you are protected too, they are also available for online chat:

https://www.fscs.org.uk/check/

Related Article - Why you investments might not be fully protected

 

4. Unbiased Investing

With restricted advice firms the investment portfolios they recommend are made up of funds that are connected to the firm selling the funds. This not only means that the portfolio will only ever be able to choose from a very limited selection of funds and significantly reduce exposure to FSCS protection, but it will also remove the option to invest with the experts. 

No fund management brand has a monopoly on top fund performance. Therefore, an unbiased approach to investing is required to be able to identify the specialist funds in each particular sector, the funds managed by fund managers with an expertise in that region, industry and market which can significantly enhance a portfolios quality. 

a. Diversify manager risk

b. Utilise specialist funds

c. Make investment decisions based on facts

 

5. Exclusivity

Many investors think they can only use one advice firm, but this is not the case. You can have multiple accounts with various advice firms and providers.

We have no problem with a new client investing a proportion of their wealth with us initially while keeping a proportion of their wealth with another provider.

For those clients that wish to do this we will provide a performance analysis link that will update on a monthly basis, and allow a client to track the performance of our recommended investments against the other provider over time. This way we aim to demonstrate how more efficient our service is versus the other provider.

 

6. Active Management (Passive & Active Funds)

There is a lot of debate about passive versus active funds. We use both in our portfolio if the funds perform well within their sector. Passive funds are only available in a small proportion of asset classes or sectors, and in the majority of sectors Active fund managers perform better, if however a passive fund continues to rank well within a sector we will use them to keep our client costs down. Costs are important, but we do not invest to save money we invest to grow money. On that basis we strive to provide our clients with efficient performance at a reasonable cost.

Related Article - Active Funds Perform 3 X Better Than Passive Funds

 

7. Cost Of Our Services - Market Comparison

There are three costs to an investor when investing, advice cost, platform cost and fund charges. Our costs are lower than 75% of the industry according to research conducted by the regulator (FCA). We charge 0.75% per annum, to cover all advice and administration, platform charges can range from 0.15% to 0.21% per annum, and we will on a case per case basis negotiate with our platform providers depending on portfolio size. Fund charges will be determined by the collective of funds we recommend you to invest in.

 

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8. Advice Versus Self Investing

More and more investors are coming back to advice. 10 years ago with the emergence of fund supermarkets and technology resulted in a shift towards self managing. Today we see the opposite.

The three main issues we see with self investors:

a. They do not manage risk correctly - the vast majority of self investors do not work to an efficient asset allocation model which they rebalance on an regular basis. This results in their portfolio becoming much more higher risk than they realise. Over time the higher risk funds perform better than the lower risk funds, resulting in a bigger proportion of their portfolio in high risk funds. When a downturn strikes they are significantly affected. Consumer investors have no way of knowing and assessing the underlying holdings of investment funds.

b. Choosing funds for the wrong reason - the majority (not all) of self investors invest in funds that are heavily marketed to them, the Woodford fund being the biggest example. They do not assess funds based on merit, performance, underlying holdings, fund manager experience etc.

c. Poor Performing funds - a lot of self investors do not assess the fund manager past performance.

We will ensure you invest and rebalance according to your risk profile, and invest in funds that perform well.

Related Article - Self Investing Versus Advice

 

9. Quality Control - Maintaining A Top Quality Investment Strategy

An efficient portfolio will only remain efficient if it remains suitably balanced. To maintain the right balance requires ongoing management as markets are in constant flux, and even a high quality mix of investments will need rebalancing and adjusting. This is a process that involves continuous analysis and

An important point to make is that in an industry full of sharp marketing practices, pompous brand prestige and sometimes misleading sales pitches it is of the utmost importance to be informed and have access to factual information. Investors need to be aware how the funds they are invested in rank within their particular sector in order to determine how efficiently they are invested.

Yodelar will always follow a data driven, unbiased, longterm investment approach which removes emotional decision making and ensures continuous quality portfolio management

 

10. Important: Shopping Around - Have A Shopping List

Many new potential clients that come to Yodelar are unhappy with their existing returns, previous adviser, or the results they have had from self managing their investments.

We often hear from investors that they are shopping around prior to making a decision. That is great, and always welcome but the biggest issue (and we see this a lot) is that they do not know what they are shopping for i.e they have not drawn up a list of what is important to invest efficiently. The result is they often end up going with the best salesman, but not the best adviser. 

For your convenience we have created a shopping list that will help. 

  1. 1. Whole of market access to all funds/managers (not restricted)
  2.  
  3. 2. Clear defined risk models

  4. 3. Can demonstrate the performance of the funds recommended
  5.  
  6. 4. Have knowledge of the investment sectors and performance within each
  7.  
  8. 5. Have a clear, transparent and competitive charging structure
  9.  
  10. 6. Clearly defined service structure, for example, one full review per annum, regular rebalances etc
  11.  
  12. 7. UK based with defined response times and service standards 
  13.  

 

Please see links to a number of articles some new, some older, but still of value that will assist:

Next Steps

We hope that you have found the content in this article useful. Should you wish to explore becoming a client and investing through Yodelar Investments, please book a call with our advice team using the link below.

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Important Risk Warning

This article is not personal advice. This article gives information as to past performance of investments. Past performance is not a reliable indicator of future performance. Always seek personal advice from an FCA regulated adviser. The value of investments will rise and fall, so you could get less that what you put in.

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