Portfolio Tips From The Premier League

Posted by Simon Moore on September 8
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It turns out there are some lessons in football that can apply to your portfolio.

 

Defence Matters

Often the top of the table clubs are praised for great goal scoring ability, with Diego Costa helping Chelsea to the title last season. Just as Harry Kane's 29 league goals kept Tottenham in title contention all season. However, defenders get less glory but matter just as much. Yes, the top clubs score more, but it matters that they concede less too. In managing a portfolio, the equivalent of defence is having assets like bonds and gold in your portfolio. Should concerns about economic growth surface, then these assets can provide stability to your portfolio and help avoid big losses.

 

Add International Exposure

The Premier League is one of the most international leagues in the world with stars from Argentina to South Korea. It's about the best talent, regardless of the country of origin. Similar rules apply to investing. It's now relatively easy to invest globally if you use Exchange Traded Funds (ETFs) and so whether the best stocks are in the UK, Japan or Brazil you can include them in your portfolio. Unlike in football, doing this can also help manage risk because you aren't only dependent on a single country doing well. Given that there's some volatility with the pound depending on how Brexit negotiations go, international diversification can be especially helpful for British investors currently.

 

Fortunes Can Change

Last season Leicester City went from champions to mid-table, Chelsea did the reverse, surging from last season's mid-table result to win the league outright. In investing, fortunes can change too. As a result it doesn't make sense to focus too much on the short-term, such as this week's news or last month's performance. Instead portfolios should be built for the longer term with a focus on years, not months, and if something falls in value, it may be an opportunity to buy it because it may now be inexpensive. On the other hand, an investment that seems 'hot' and has been performing well for a while may be something to lighten up on. At Moola we rebalance portfolios automatically so your aren't too exposed to extreme trends in the markets.

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It's All About The Team

Finally, in investing a team oriented approach helps. At Moola we use about the same number of different ETFs in portfolios as players on a football team. This helps create balance, if bonds are our defenders and gold is our goalie then European and US shares make up our midfield, and the fast growing economies of emerging markets are our strikers. They won't all have a great game every single week, but in combination we are confident they will deliver steady results just like a robust Premier league team.

 

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Written by Simon Moore

He was previously CIO of FutureAdvisor, a US digital advisor. His most recent book Digital Wealth, explains automated investing. He studied economics at Oxford, and completed his MBA at the Kellogg School of Management.

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