A man uses a smartphone in front of an electronic stock indicator of a securities firm in Tokyo, Tuesday, Feb. 20, 2018. Asian shares were mostly lower Tuesday after a U.S. holiday and attention turned to the U.S. Federal Reserve. (AP Photo/Shizuo Kambayashi)

CAPE TOWN - Investors may not apply the same level of rigour to a share portfolio as they do to the rest of their financial portfolio. A holistic view, however, can help you to maximise your share portfolio in the long run because it helps to cultivate a considered and disciplined approach.

Just like any other part of your portfolio, your share portfolio needs a clear objective and strategy. It is important to stick to your investment objectives and not to second-guess yourself or your investment adviser.

Here are three resolutions to follow when managing your share portfolio:

1. Holistic planning encourages you to view your shares objectively

Equities have proved to be the best asset class over time. Share portfolios, therefore, have enormous potential to enhance the returns of your overall financial portfolio, provided you take certain factors into account.

One consideration is that, because the returns on shares are not guaranteed, selecting the correct shares is of primary importance. Another is to ensure you avoid the mistake of becoming emotionally attached to some of the shares in your investment portfolio. A financial planner can act as a sounding board and help you to take a more objective view of your holdings.

2. The correct time horizon is important

We often find that, with shorter-term investments, investors tend to take on riskier shares because the yield potential is more attractive. This approach may lead to disappointment because the probability of loss is typically higher in the short term. Make sure that, when you invest in a share portfolio, you define your investment horizon correctly, and that you identify a risk/return trade-off based on facts, rather than hopes and expectations.

3. Complementing a share portfolio with other products can lower risk

The danger of viewing your share portfolio in isolation is that you may become overwhelmed by volatility or periods of poor performance. Although share portfolios can be higher risk, they tend to have higher returns over a long investment horizon. For this reason, in a holistic plan, they should be complemented with lower-risk vehicles. Choose products that suit your risk appetite and your investment horizon, because not all investments may be equally suited to your purpose – particularly, for example, when you are saving for retirement. When you view your shareholdings as part of your entire investment portfolio, you are less likely to be discouraged by short-term volatility and respond emotionally.

Holistic financial planning is not about putting you in a box and limiting your choices. Instead, it is about ensuring that every part of your portfolio contributes to the success of your overall financial plan – including your share portfolio.

Grant Meintjes is the head of securities at PSG Wealth.

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