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July 16th, 2018

Investing lessons from World Cup


Football fever is on. In the last World Cup, few expected Costa Rica to achieve much. Yet they made the quarter finals of the tournament. At the same time, highly regarded nations such as Spain, Italy and Portugal failed to make the knock out stage of the competition. It’s early in this tournament, but already we’ve seen Mexico beat the defending champions, Germany.

As yousit glued toTVs, phones or tablets immersed in the World Cup, you could take important investing lessonsfrom the strategies adopted by the teams.

Here are some important lessons you can learn from the way the successful teams play the beautiful game:

Set your strategy

Long before a game, the team would have mappedtheir offensive and defensive strategies. Similarly, in investing, you should have your long-term and short-term goals in mind. For example, you may be saving for the down-payment on a home or perhaps you want to provide tertiaryeducation for your children. Maybe your goals are even longer term and you’re building a nest egg for retirement. Just as a team has to qualify for the second round,to reach your goals, you need to determine their practicality and outline each goal’s investment time horizon. Time is important because the longer it takes to achieve a goal, the more aggressive you can be in your investment choices. Conversely, when there is less time to achieve a goal, consider lower risk investments.

A basic level of fitness: Budget

Just like any team with eyes on the winning the World Cup, you need to have a basic level of fitness. The easiest way is to start a budget which is the bedrock of your investment strategy. It could mean simply allocating your income between savings and different categories of expenditure and debt repayment.  Establishing and sticking to a budget leads to financial discipline and helps you to understand how much cash flow is available each month for investment and savings. It is a rule of thumb that establishing a regular monthly savings plan is recommended over one-time lump sum investments to reduce stress on cash flow.

Don’t depend on one player: Diversify

It’s never a good idea to put all your money in one investment, just like it’s never a good strategy to rely on one player to score all your goals.Just like a balanced team, you should have a portfolio which reflects different asset classes. You need to consider adjusting your investments to keep to the desired allocation between stocks, bonds and cash.  While it is difficult for investors to forecast market moves, investors should spread their eggs among many baskets and remember that drastically altering your portfolio too often can bring negative results. Such asset class diversification allows investors to limit their risks by reducing the effect of a possible decline in the value of any asset class or security in the portfolio, so if one asset class or security underperforms the others can offset the impact. Mutual funds dig a bit deeper than simple bank savings because its earnings potential carves a route to achieving one’s goals.

Never panic

Teams study opponents and then formulate their strategy to overcome them on the field. Knowledge of things you are up against help in creating a winning strategy. Similarly, you should doresearch prior to investing. Never panic when there is market volatility – and do not make irrational choices.

Have a financial coach

Your financial advisor can act as your team coach. Just as the coach plans out the strategy and trains his players, by hiring an advisor investingbecomes more strategic.  With guidance, your financial position will be reviewed to develop a personalised plan with the most appropriate savings and investment vehicles. Moreover, an advisor will work closely with you throughout the financial planning process to helpidentify your goals and objectives, such as home ownership or tertiary education for your children so you won’t be caught offside during life’s stages.

 Investing: score with a good support team

Unfortunately, T&T did not make this World Cup but it does not mean you can’t back another country to ease the pain. Similarly, in investing you can spread your risk across many countries, sectors and investment options to avoid facing penalties. That’s where UTC portfolio managers come in. As premier fund managers, we can enhance the performance of yourinvestment portfolio and identify ways to continue to save effectively and generate wealth.

Just like a football team out to win the World Cup, investing takes time, serious study, disciplined effort and lots of patience.Go for your goals!