Rising Tide Blog

The Wealth Coach’s No.1 Investing Tip

Posted by Matt Hale

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Did you know, like a cake of soap the more you touch your investments the smaller they get?
The worst offender is the chaser. A chaser is someone who monitors investment markets via the media, friends & family and constantly moves their portfolio to the best performing asset class of the day whether it be property, bonds or International and Australian shares.

The problem is that often when they do this, by the time they switch their money across to the new investment they’ve missed the rise. The problem with this is occasionally like in 1994 & 2008 the best performing investment one year, is the worst performing the next.

A better approach and one endorsed by the world’s best investor Warren Buffett is to pick a diversified investment portfolio and stick to it, rather than using the chaser mentality.

I bet you want proof!

Let’s compare the two methods by looking at what would’ve happened with a hundred thousand dollar investment portfolio between 1981-2011:

Had you chased, your overall rate of return would’ve been 8.4% and the portfolio would be worth a little over 1.3 million in 2011. Not bad, right?

Had you done it Warren’s way the same hundred thousand dollars would be worth well over 2.4 million at the same time. That’s an extra 1.1 million for much less work!

Makes good sense, don’t you reckon?

Good luck!