Football Formation Asset Allocation. The Investing strategy
Any world-class football team whether it was Man United (1999) or Brazil (1970) had great individual players but ultimately it was the team and the combination of these players that made these teams so great. Your investing portfolio also needs great individual performers and by combining the talents, traits and flairs of the individual assets will mean together collectively will have a world-class performing portfolio.
A world-class football team has great individual players. It’s the team and the combination of the individual players that make teams so great, the right balance of defenders, attackers and a goalkeeper. If your team was made up with just goalkeepers you wouldn’t score many goals.
The most important investment decision you make is your long-term mix of assets you hold. These assets also need great individual performers that work together as a team. Combining their individual talents of each asset will mean together collectively you will have a world-class performing portfolio. When an asset increases it’s like scoring a goal and when a liability increases it’s like conceding a goal.
The aim of the game is to score more goals than you concede in the time you have to play. Investing is like managing a good football team, picking the formation of your players or assets depending on their individual strengths and abilities. Different qualities work together to form one cohesive unit that is greater than the individual parts.
Investment management is simple but it’s not easy. It’s simple because the principles of successful investing are relatively few in number however it’s a long term strategy and must be given time as part of a long-term plan. You can pick the team depending on your personal risk profile. You can choose to be more defensive or more attacking. If you are younger you can afford to take more risks as you have the time on the clock to see more ups and downs of the market.
Diversification is the only free lunch in investing. A mix of assets in your portfolio will mean different assets complement each other and work together in synergy. It’s like having an umbrella business for when it’s raining and having an ice cream business for when the sun is shining.
This is known as asset allocation. Meaning the sum of the total will be greater than the sum of all the individual parts. Different asset classes will reduce the risk you have in your portfolio whilst getting higher rewards. Having money in land, businesses and some money in reserve gives peace of mind that whatever happens in the markets, politics or economics you will be alright. This is a big relief.
Investing is like managing a good football team. You pick the formation of your players or assets depending on their individual strengths and abilities. You need many different qualities that work together to form one cohesive team that is greater than the individual parts. Investment management is simple but it’s not easy. It’s simple because the principles of successful investing are relatively simple in number and easy to understand. You face risks in managing your money and the two most important ones are inflation and volatility. Inflation is the reduction of the spending power in your pocket and volatility is how much zigs and zags or ups and down that the asset historically moves. Investing is easy with a firm commitment to a long term plan and strategic asset allocation framework.
I created Football Formation Asset Allocation (TM)based on the modern portfolio theory, which won the Nobel prize in economics in 1990.
The most important investment decision is your long term mix of assets. An asset puts money into your pocket and a liability takes money from your pocket. In terms of football an asset is scoring a goal and a liability is conceding a goal.
Balance is important in life. 1) Mind, body and soul, 2)Work, rest and play and 3) Land, business and reserves. This balance in life gives great peace of mind. Having a solid defence to prevent you from letting in goals (or losing money) and a vibrant attack that will score goals for you and put you in the lead (or gaining money).
Rebalancing your team every year like you would a real football team. The old buy and hold model is as outdated as the 1970 Brazilian players today. Companies like football players also have a lifecycle. They are born, reach their peak and then die. Think Kodak or Polaroid, these once great businesses were the startups of their day.
Like a setting sun, everything has their time and the sun has set on many once-great companies.
Today you need to own yourself first. Is your portfolio scoring or are you conceding? Do you have more assets or liabilities? Is money going into your pocket or is money leaving your pocket?
The Football Formation Asset Allocation (TM) is the best way to build your portfolio with different complementary assets. Like an ecosystem, each individual player has unique strengths and weaknesses that working together has a total that is greater than the sum of the individual parts.
The beauty of my system is that you can tailor it to your needs yourself without the need of a financial advisor.
Getting educated in financial guidance is one of the best ways to reduce your risk without paying excessive fees for advice you don’t necessarily need. If you are younger or have a higher risk tolerant you can play a more attacking and aggressive formation. If you are reaching the twilight of your life or have a cautious risk tolerance you can play a much more defensive strategy.
The aim of the system is to learn what you can control and what can’t so you can thrive no matter what happens.
This is explained more in my book Millennial Money Mindset: If you Want the Fruits You Need the Roots or my youtube channel Millennial Money Mindset or follow me on Instagram @millennial_money_mindset
I have created a card game called Football Formation Asset Allocation and teaches you how to invest using a football theme.
My online investing course called Football Formation Asset Allocation is now available on Udemy learning platform.
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