Great FT article "Ten golden rules of investment"

[Brendan Burgess]

Terry Smith has written a great article

[FONT=&quot]Boost your returns by avoiding common mistakes
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[FONT=&quot]All ten rules are excellent, but these are my two favourites
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[FONT=&quot]If you don’t fully understand it, don’t invest[/FONT]

I always think that if you can’t understand what an investment does, it is because you are not meant to understand. So don’t invest in it.


My personal favourite to illustrate this point is a fund launched in 2011 by Parkstone Asset Management called The Tracker UK Managed Alpha Fund. This described itself as a “securitised derivative, low-cost, actively managed, multi-asset, structured investment”. I wonder what it does.

and

Don’t overdiversify
While portfolio diversification can improve your investment performance, it does have limits and is not without drawbacks. Research suggests that 90 per cent of diversification benefits can be obtained in most markets with a portfolio of just over 20 stocks.

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