Portfolio construction

Regardless of how much research and analysis is undertaken, all investments can be affected by a wide range of factors unforeseeable and beyond our control. It is for this reason it is essential to construct a diversified portfolio. When applied correctly, Diversification can provide a given level of return with the lowest amount of risk hence what we term an ‘efficient’ portfolio.

Determining an appropriate mix of assets within your portfolio will be dependant on our professional assessment of your ‘Investor Risk Profile’. This assessment is an understanding of what level of risk you are comfortable to accept in search of maximizing returns.

Generally speaking, the higher risk you are willing to accept the greater your returns are expected to be however, the greater variance of returns you will achieve over the short term. Therefore, your investment time frame is an essential consideration when determining your Investor Risk Profile. If your time horizon is for example, less than three years, many investments would simply be considered inappropriate.

An underestimation of your Risk Profile may result in you attaining lower returns than what is possible. Although over the long term, the greater risk should reward the investor with greater returns, it is imperative that you as the investor can stomach the fluctuations within your portfolio. Locumsgroup apply an ongoing teaching role of the risks involved and as a result of you becoming a more sophisticated and experienced investor, your Investor Risk Profile is likely to change over time and requires regular review.