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Bestinvest

Asset Allocation

Maximising Returns, Managing Risk.

Why does Asset Allocation matter ?

Asset allocation matters as different types of investment perform in different ways. In very general terms, riskier investments, such as equities, should provide the best returns over the long term, but they will also be the most volatile. Combining different types of investment via asset allocation in a portfolio can help to even out these swings in value, especially if they are "non-correlated" (i.e. their prices move independently). This is why it usually makes sense even for growth investors to have some exposure to bonds and cash, even though their long term potential is less than that of equities.

The Asset Allocation of a portfolio is reckoned to account for over 90% of the returns and has a direct impact on the level of risk. If you an investment timescale of 3 years you should take much less risk than if you have over 20 years to make regular savings. We use a range of Asset Allocation models to provide targets for the portfolios of our clients. Our valuations then show if there are any variances with the model.

The choice of asset allocation model depends of your attitude to risk and your requirement for income.

Asset allocation models

Risk Profile Income Required
Nil 2-4% Over 4%
Very Cautious Model Model Model
Cautious Model Model Model
Moderate Model Model Model
Adventurous Model Model Model

Asset Allocation and Market Timing

Market timing plays a minor role in investment performance compared to Asset Allocation and we strongly recommend investors avoid the temptation to try and second guess the markets. Contrary to popular opinion, even professional investors cannot predict short term market movements with any consistency and successful investing is not based on timing decisions. However, if you are committing a large sum, it does make sense to spread out the timing of the initial investment.

Manager of the Month

Martin Lau - Manager of the month

Martin Lau

First State Greater China Growth

Career MRI 99.0%

Though Fidelity’s Anthony Bolton is currently making headlines with his new China fund, First State’s Martin Lau already has a successful track record in the region dating back to 1998. Born in Hong Kong, Lau studied engineering at Cambridge University then started his career at Invesco Perpetual before joining First State in 2002. Lau works in the Asia Pacific team under the legendary Angus Tulloch and is tipped by many as a Tulloch’s possible successor. Lau's four star rated First State Greater China Growth fund offers exposure to Hong Kong and Taiwan as well as mainland China, and has achieved strong outperformance whilst offering some downside protection in what is a volatile region for investors.


Bestinvest (Brokers) Ltd & Bestinvest (Consultants) Ltd are authorised and regulated by the Financial Services Authority

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