#34 Do multiple investment strategies make sense?

The tendency to divide one's wealth into different pots in the mind is called mental accounting. Our brains seem to love separate portfolios. For example, you have all your stocks in one portfolio and all your bonds in another. Instead of one big portfolio based on a mix that is at least as good. However, a separate investment strategy means that over time, as different asset classes perform at different rates, the investment risk will no longer match your personal risk tolerance. And this is exactly what we, as wealth managers, have to prevent, because it is part of our responsibility.

Increased administrative burden

Multiple portfolios also mean more work. This is because each investment strategy has to be managed separately, which means that a separate risk appetite questionnaire has to be completed for each portfolio and multiple tax documents have to be managed. All of this is repetitive administrative work that we are happy to spare our clients.

With a single investment strategy, this effort can be significantly reduced. A single portfolio requires fewer administrative steps and provides a clear and concise structure that makes it easier to keep track of things.

The advantage of a single investment strategy

At True Wealth, we take a client-centered approach that focuses on your individual financial goals and risk tolerance. That's why all our clients have only one investment strategy. We ask our clients about their financial situation, investment horizon, knowledge, and experience with investments, and financial goals. Our goal is to help our clients manage their wealth as a whole.

This holistic approach not only minimizes administrative effort, but also ensures a clear overview and consistent risk management. Investors benefit from more efficient and targeted wealth management.

When it makes sense to have multiple portfolios

There is one exception, however, where multiple portfolios can make sense. Namely, for children's portfolios. Since children typically have a longer investment horizon than their parents, it can be advantageous to have a separate portfolio tailored to the child's specific needs.

At True Wealth, we therefore offer the option of setting up a separate portfolio for each child. This portfolio remains the responsibility of the parents until the child turns 18. After that, it is automatically converted into an adult portfolio without the need to sell any securities.

Conclusion

Having multiple investment strategies may seem attractive at first, but in the long run it can lead to unwanted risks and unnecessary administration. A single investment strategy tailored to your individual goals and risk tolerance offers clear advantages in terms of clarity, efficiency and risk management.

Ultimately, the decision to pursue one or more investment strategies simultaneously is a personal one.

What is your view on this? Do you follow multiple investment strategies, or just one? Send me an e-mail with your feedback.