Dedicated Follower of Fashion?

By Gareth Williams, CertPFS CertsCII(MP&ER)

When Ray Davies wrote these words in the ‘60s who would have thought that they would have applied to the world of Investments? 

People have been investing, in one form or another, for years typically in with-profit policies, bought from the salesman collecting door-to-door in the evenings with his leather bag full of pennies writing into a premium book. 

Some people were fortunate enough to have wealth which was invested in stocks and shares which accumulated over the years and then inherited by their children who then held these very same shares but didn't sell them because it wasn't the "done thing". 

The 1980's brought privatisation; firstly with BT, then British Gas, then BP and the Electricity Board was sold off and the ordinary man in the street became a shareholder because you could buy shares for an investment of less than £200! I remember those days well because that's when I first dipped my toe in the investment pond and became a "shareholder"! 

Then came the dot.com revolution and companies were selling shares in themselves to expand and make more money for themselves and shareholders alike. 

We were then deluged by glossy newspaper adverts promising the "next big thing" in the world of finance and investments. Then came large TV campaigns for Unit Trusts in companies like Eagle Trust (hands up who succumbed to their fantastic advertising campaign? Don't worry - you are not on your own!) 

Finally came the internet and mass-ownership of PCs, Laptops, Hand-Held Multi-media devices and the proliferation of (spam) e-mails. You can't move without having some self-proclaimed Investment Guru spouting forth about the "must-have" addition to your portfolio! 

Now, don't get me wrong, the World needs enthusiasm and without investment, either direct or indirect, companies will wither and die but the one things that is missing is the need to periodically take stock (no pun intended). By reviewing exactly what investments are held, what's working, what's stopped working, what's never worked and what's losing you money you can keep on top of them - and not the other way round! 

Rebalancing is a technical term which should be in the armoury of every adviser worth his salt. That is where an investment that is performing well has some of the paper-profits converted into real profits which is then invested elsewhere to buy more stock in areas that aren't performing as well as they should do but with real potential to improve. By converting paper profits into hard cash you not only secure those profits if the value decreases in the future but you are buying other investments "on the cheap". 

Moving money around like this is all well and good as long as the most suitable and relevant investment strategy is in place. This is where you need to look forward and see what kind of investment areas are suitable and, more important, worthy of your hard-earned money. Looking back at what has happened is an exercise fit only to see what mistakes have been made and what to do to avoid them in the future and until someone makes a Time Machine that can take us back to the very moment we made those mistakes we can only dwell on them. 

Imagine a typical investment portfolio made up of inherited shares, privatisation shares, unit trusts and sundry investments bought either from reading the Sunday papers or, even, a hastily-arranged investment taken through an adviser based in your Bank and you will have the financial equivalent of a wardrobe containing your grandmother's fur stole, your father's dinner jacket, a pair of velvet loons and an afghan coat, some drain-pipe jeans and a sequinned t-shirt, a pencil-thin black leather tie and frilly-fronted shirt that makes you look like a ventriloquist! 

If my "wardrobe" resembles your "wardrobe" then call us for a Gok Wan-style makeover.