Phasing a portfolio into the market can provide some behavioural comfort to clients. For clients who may have inherited a large sum of cash or received a large pay-out after selling a business, it is a daunting decision to invest immediately in a portfolio that could see its value fall by 30% during a market crash, for example, even if over the long-term this is the appropriate portfolio for them.
Given that clients suffer the pain of loss twice as much as the elation from gains, phasing allows clients new to the firm – investing from cash rather than a portfolio – to ease their way into the markets and also the relationship. We can see the merit in this.
We have undertaken some analysis to provide greater insight. Download our full report here
Spoiler alert! We conclude:
• There is no right or wrong answer to phasing.
• Clients need to be aware of both the down and the upsides of the approach they adopt.
• It will always come down to a trade-off between the regret of suffering immediate losses balanced against the regret of not fully participating in any material market rise. Each client will have a personal preference.
As ever please contact us if you would like to discuss this further