MARKET COMMENT
Ideas For Bewildered Investors

By David Kuo (TMFDragon)
December 2, 2003

According to ISIS Asset Management (LSE: ISIS), 70% of the UK's private investors openly admit their investments are in a mess. The fund manager found that one in seven private investors no longer know what they are invested in anymore. Furthermore, close onto a third are unable to describe their investment approach.

ISIS suggests that these bewildered investors should consider investing in products such as funds of funds. The fund manager reckons that these investment vehicles have a coherent overall asset allocation strategy. It added that the portfolio will be constantly maintained in a tax efficient environment.

ISIS is right up a point. Private investors do need to be more aware of how their money is being invested. However, a fund of funds, simply a fund that is made up of a range of other managed funds, is by no means the only way out. In fact, it's a very expensive solution given that management fees will be paid twice - once for the managers of the external funds and again for the manager of the overall fund!

One in seven investors no longer know what they hold in their portfolio. What normally starts off as a well-intentioned buy-and-hold share turns into a buy-and-neglect holding. The obvious solution here is to dedicate some time to gathering together all your broker statements, and any paper-based share certificates that you may still have. Entering your holdings into an online portfolio system can then help you monitor your investments in future.

Just over one in four investors cannot recall why they invested in a particular share - just that it seemed a good idea at the time. These investors are also unsure as to whether they have the right mix in their portfolio. At least this group know what is in their portfolio, even if they don't know why they now own the shares.

Again this is an easy situation to get into because companies are evolving concerns. The answer here is to examine each company in turn, checking their latest announcements, and decide if it still matches your current investment strategy. It is worth remembering that it is not only companies that change but also our own investment strategy alters over time too!

In my opinion, investing should be fun, and maintaining your share portfolio should equally enjoyable. It need not be a time-consuming activity but some time does need to be set aside to monitor existing investments and to search for new ones. If you think this will take up too much of your time then a more passive investment approach would suit you better. This can be through a simple low-cost stock market tracker, and if the investment is wrapped up in an ISA, then it becomes a tax-free investment too!