exposed to both these type of funds you could find your portfolio under-performing if energy or commodities hit a rough patch. Equally, financial funds and property funds can be quite closely correlated given the interdependence between the two, so it pays to closely examine your exposure to these type of funds. Of course, you might look at things a different way and think that if your portfolio is heavily correlated then you’ll get more benefit when those funds are performing well. This is true but is obviously a very risky strategy to adopt as the downside can be very painful indeed. So now you can see how what might appear to be a cautious investment strategy can in truth be a risky one if funds that are relatively safe in themselves turn to be heavily correlated. Equally, a more ambitious investor might be spreading his money across a range of more
volatile yet uncorrelated investments and find that his approach turns out to be less risky than it appears. Solid portfolio returns are usually best achieved by successfully diversifying your investment across a range of assets and sectors and ensuring that they have their ups and downs at different times. This can be a tricky balance to achieve on your own so it’s best to turn to an experienced professional for advice. Your financial adviser will know a lot about diversification and correlation and will know which funds and investments will suit the type of investor you are and your financial goals. Their experience, expertise and qualified judgement will help you identify how correlated the funds in your portfolio really are, and whether your portfolio is suitably diversified to protect you from market turbulence. In the end, your financial adviser is the best person to help you discover the type of investor you really are.
About Neal Kelly is a Co-Founder and Director of Thomond Asset Management and can be contacted @ neal@thomondam.com 82 O’Connell Street, Limerick | T +353 (0)61 462 024 | F +353 (0)61 312 055 | E info@thomondam.com www.thomondam.com Folk Asset Management Ltd t/a Thomond Asset Management is regulated by the Central Bank of Ireland.
Warnings: 1. The income you get from an investment may go down as well as up. 2. The value of your investment may go down as well as up. 3. Benefits may be affected by changes in currency exchange rates. 4. Past performance is not a reliable guide to future performance. This outlook does not constitute an offer and should not be taken as a recommendation from Thomond Asset Management. Advice should always be sought from an appropriately qualified professional