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26 Jan

HOW TO IMPROVE YOUR INVESTMENT PORTFOLIO

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If you’re looking to become an angel investor, or you’re just looking to manage your own portfolio for the first time, we’ve rounded up the best tips to help you achieve the best results.

START WITH A PLAN

Having a clear idea of where you are and where you want to go financially is a crucial first step.

Take a look at how you plan to achieve your goals, as well as contingency plans – such as carrying adequate insurance – for unforeseeable events that can derail even the best laid plans.

Use sources like the Financial Planning Association and Certified Financial Planner Board of Standards. Both websites contain useful resources such as articles, videos and planning tools to help you create your own plan. However, if the process seems too much for you, you should look into finding a quality financial planning professional to help you out.

DIVERSIFY

It’s a basic rule for investing, but it’s still an important one. By diversifying your investments, you’ll improve your chance of getting a better return. You can also learn how to manage and improve the balance between risk and return by spreading your money across different investment types and sectors whose prices don’t necessarily move in the same direction.

Diversifying your investment can help you smooth out the returns while still achieving growth and reduce the overall risks in your portfolio.

HAVE REALISTIC EXPECTATIONS

Companies that investors often do the best with are the “singles” and “doubles” because they don’t need the company to raise large amount of capital to go after the £100 million+ outcome.

Investors can often be best suited going for companies that are worth in the low single digit millions who are trying to go for the most likely outcome for any company, which is £20­50 million.

That can be a ten times return without having to raise VC capital. This is often a better approach than going after those rare unicorn investments.

GET DISCIPLINED

By taking the time to develop an investment process, you will be able to address how you will build and maintain your investment portfolio. From the allocation of your assets to its implementation and monitoring, your investment process will define how you go about investing with the discipline of a professional.

Make sure that your process takes into consideration your capabilities and limitations. Keep in mind that managing your portfolio does not mean you have to do it alone – consider developing a network of like­-minded investors to share information and emotional support.

FORMALISE A FUNCTIONAL INVESTMENT POLICY

Your investment policy statement should document all that you have covered so far. A well written investment policy will serve as a working document to help keep you disciplined and focused on executing your plan. You can find sample investment policy statements online which you can modify to meet your needs.

You may find as you work through these steps that you do not have the desire, time, or knowledge to manage your portfolio on your own. The more elaborate your investment policy, the more likely you may encounter difficulty developing a process that works for you.

Whether you decide to continue managing your portfolio on your own, or hiring a professional, either way these tips can go a long way for you. The time spent figuring all of this out will help you have a clearer understanding of what you're looking for in an investment and serve to guide you as you grow as an investor.

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