Professional portfolio thanks to index funds
There are two elements that need to come together in order to realise this desire. Firstly, investment funds are required. They allow you to buy a wide range of shares, for example, with a small amount of money.
Instead of putting all your money into a single share, you invest in 50 or more different shares at the same time via a fund, depending on the fund. This spreads the risk: if a single share in the fund loses a lot of value, this only has a minor impact on the overall portfolio, provided that it is not heavily weighted.
Funds therefore make sense for investors who do not invest tens of thousands of pounds at once. But a professional portfolio needs funds that track an index and can be traded on the stock exchange at any time, known as exchange-traded funds (ETFs). This is not a new invention; the first such index fund was issued in 1976. Such funds are now also used by professional investors.
Not only are they easy to buy and sell, they are also cheaper. Their inventor, Jack Bogle, found that very few investors managed to achieve a better return than a stock index, so he focused on management costs. Many ETFs are passive funds and track an index without making any further investment decisions. This makes them much cheaper than other types of investment funds.
Funds are therefore a sensible option for investors who do not wish to invest tens of thousands of pounds at once.
Michael Pattis Portfolio Manager - Lead Discretionary Sales
ETFs are available for all asset classes. This is because a professional portfolio requires bonds, equities and complementary investments such as gold, which is the second element: the portfolio view, i.e. the combination of index funds to form a balanced whole.
Combining the various ETFs in a way that best suits your own savings profile is not that easy. The success of index funds has led to an explosion in the number of products available. Careful selection is therefore crucial to investment success.
Once you have put together your portfolio, that's not the end of it. It needs to be maintained. This point in particular is crucial if you want to keep up with the professionals: regularly rebalancing the proportions of equities and bonds so as not to jeopardise your desired savings goal. If you fail to do this, individual components may take on an undesirably large weighting.
Selecting index funds, bundling them into a portfolio, monitoring them and regularly rebalancing them is a time-consuming task. We are happy to take care of this for our customers so that they have more time for their lives.
