Building a fund portfolio is the first step, then all you need to do is to manage it. In this article, we will briefly introduce four common portfolio management strategies.
The Wing-It Strategy
This is the most common fund portfolio management strategy. Usually, if you don't plan ahead or follow certain structure when designing your portfolio, you will have to apply the wing-it strategy for the follow-up management. For example, if you plan to increase the capital investment in your investment portfolio now, how will you choose the investment object? Are you going to look for a new investment because you are unhappy with the existing one? Or will you invest a little in this and a little in that without a plan? At this point, if you have prior planning or structuring, it won’t be difficult to add money to your portfolio. Most experts agree that the wing-it strategy is difficult to succeed because it lacks any consistency.
Market Timing Strategy
The market timing strategy implies that investors should enter or exit a sector, asset or market at the right time. Good timing means buying low and selling high. Unfortunately, only a very small number of investors can achieve this, because investor behavior is often driven by emotion rather than reason. The truth is that most investors do the exact opposite in the market, which is buying high and selling low. This also makes many people think that this strategy is not suitable for actual trading. Although there are many indicators in the market that can help investors choose good trading opportunities, no one can predict the future consistently and accurately.
Buy and Hold Strategy
This is by far the most widely circulated investment strategy. It is popular because it accords with the theory of statistical probability: the market often goes up 75% of the time and goes down the rest 25% of the time. With a buy-and-hold strategy, you can make money 75% of the time whether the market is up or down. If you use other strategies to manage your portfolio at the same time, you are very likely to be ahead of the others and even make money more than 75% of the time. Another reason this strategy is so popular is that it is simple and easy to execute. With this strategy, our portfolio will not perform better or worse: it is simply buy and hold.
Performance-Weighted Strategy
The performance-weighted strategy falls between the market timing strategy and buy-and-hold strategy. To execute this strategy, you need to keep an eye on your portfolio at all times, redistributing capital based on fund performance. Use a performance-weighted strategy that reweights your portfolio every year so your portfolio returns far ahead of other investors.
The key to portfolio management is developing a strategy and sticking to it. The most successful money managers in the world succeed because they have a strategy for managing money and investment that works for them, and they stick to it. Warren Buffett once said, "To maintain investment success throughout life, we do not need extraordinary intelligence, business insight or insider information. What we really need is a complete knowledge structure and thinking framework and the ability to weed out emotional distractions, which helps us make better investment decisions."
