2009-09-23
When successful entrepreneurs get the question of what they have done in order to succeed with their business idea, the recurring advice is to think through the long-term strategy and stick to it.
In order to make successful long-term investments, the same things apply, think long term and stick to the strategy.
Evaluate the risks
As independent financial advisors for successful entrepreneurs, we have always worked on spreading the risks in our clients' investments. Those who have done that have been able to maintain the value of their assets during the crisis that we have recently gone through.
Those who have focused on a small part of the global market have often seen their values decrease by more than 50 percent. We work persistently to find out the overall vision and experience of different types of risks for the customer.
It gives our clients´ capital the possibility of long-term wealth and to generate a higher profit.
By spreading the risks in different assets, i.e. not only Swedish equities, interest rates or hedge funds but also other investments are profitable. Currencies, derivatives, commodities and the issuer risk in so-called structured products will also be considered in the risk profile.
Stick with one strategy
With strategic goals, it is easier to stay away from high-risk options which means few investments in similar assets and to become fully invested in the rising market, or you may be forced to sell due to lack of liquidity when the market goes down and the timing is wrong.
With a well organized allocation involving the right balance between different assets over time reduces the overall risk and provides a positive return over time.
When the stock market goes down it is important to have a higher percentage of assets to balance shareholding which is not affected as severely. The advantage with following the strategy is that it provides built-in benefits when the assets invested begin to increase.
In order to stick to the agreed risk in the total portfolio, some of the other assets are moved in order to face a downturn better. A recurring "problem" is that many Swedes have too many shares of Swedish stocks in their portfolios. From a global allocation perspective, it is a very high risk and with a return on the Swedish stock exchange of 0 percent over the last 10 years, it is clear that the customers are not being paid in proportion to the risk they took by putting money in the Swedish stock exchange.
Ask a Japanese or American investor if he or she would see it as a high risk to invest all their assets in the Swedish market and in SEK.
Given that the Swedish market is less than one percent of the world's resources the risk analysis is easy, many Swedes are taking huge risks without being aware of it.
Buy cheap and sell expensive
To have good liquidity is always a good advice. When the market falls, excellent business opportunities arise and those who have money can take advantage of the situation and not having to make hasty decisions and quick sales. Whether or not it is a company that is acquired or for example oil, which was down to low levels earlier this year, it is about buying cheap and selling dear.
Independent financial advisor
We are often asked what we can contribute with in comparison with, for example, the bank. Businesses have their own agenda and the advice comes from selling their own or others' pre-packaged products. Of course, the Banks recommend their own funds and savings products because it is their business.
You would not leave SEB with Handelsbanken's funds even if it would suit you better. Insurance intermediaries may be affected by the sale of products in which the commission is best.
There is no right or wrong here, this is how the Swedish market looks like. We do not have a finished product when we meet our customers but we will give you independent advice based on your risk profile, which provides us with an investment mandate that results in a balanced asset allocation that will give you better growth over time.
Think about the tax
Taxes are an expense and reduce the tax burden on investment will increase the long-term value of your investments and hence the profitability of your business.
Choice for entrepreneurs
Make an active choice today that fundamentally improves the conditions for increasing the growth of your business.