Callisto Wealth Management Ltd
Rainford Hall
Crank Road
St Helens
WA11 7RP

Don’t have a mismatch with your investment goals

One of the most important principles of investing is to invest for the long term. Longer time frames enable investors to benefit from compound investment growth and to keep market volatility in perspective.

Nowadays, investors have a longer time horizon for investing than they think. People are living much longer, and more investors will be using more flexible pension facilities since the recent pension freedom changes came in earlier this year, which usually involve them staying invested throughout retirement.

If investors accept that they should invest for the long term, and then adopt an actively managed investment strategy, there can often be a mismatch between their long-term goals and the strategies of their fund managers. Active fund managers increasingly invest for much shorter time periods these days, as they feel that the wealth of information on hand gives them an edge.

The length of time that managers hold investments and the rate that they sell them are called the portfolio turnover rate (PTR). The PTR is how often a fund manager sells all the stocks in the fund in a given year. A turnover ratio of 100% or more does not necessarily suggest that all securities in the portfolio have been traded. In practical terms, the resulting percentage loosely represents the percentage of the portfolio’s holdings that have changed over the past year.

A low turnover figure (20% to 30%) would indicate a buy-and-hold strategy. High turnover (more than 100%) would indicate an investment strategy involving considerable buying and selling of securities. There are a large amount of actively managed funds that have PTRs exceeding 100% in the UK. A number of things can drive high PTRs, but fund manager league tables must be a factor. Investment managers can be under pressure to produce better results, which can lead to excessive dealing to try to maintain their position.

I suspect that most investors are completely unaware of the PTR and would think that when they invest, they are investing for the long-term. Little do they know that some of the fund managers may hold a stock for a matter of days.

Thankfully passive investment styles like those adopted at Callisto remove the potential mismatch between an investor’s objectives and the fund managers short-term decisions. Index funds are by definition fully diversified and own every stock, so the PTR is very low. Our buy-hold and rebalancing strategy ensures that our portfolios are continually in line with our investors goals.

Why not pop in for a coffee and a chat about your plans and your investments. We’ll review your portfolio with you and give you a second opinion. If we think it is well-suited to your long-term goals, we’ll happily tell you so. But if we think it isn’t working as well as it should, we’ll explain why. Give us an hour and we’ll show you how to get the best out of your life and your money.

Please feel free to get in touch - or phone 01744 881 421 We would love to hear from you
Request A Callback

Other Interesting Articles

The most comprehensive investment library anywhere

What are life and financial transitions?

Read Article

How do I get started?

Read Article

Which is best – financial advice or financial life planning

Read Article

Life Planning

Learn how we help you to identify, create and maintain the lifestyle you want.

Learn More

Financial Planning

Discover how we use the technology that is transforming our profession.

Learn More

Investment Planning

All investment portfolios are not the same. Learn what makes ours different.

Learn More