Four ‘rugby players’ in your portfolio

To mark the start of the Rugby World Cup, we describe how different investments can work together like a well-rounded rugby team.

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  1. Rob Morgan

With much excitement, the Rugby World Cup kicks off in Japan today. Teams are finessing their tactics, deciding whether to play a higher risk, attacking game or a more defensive one – rather like investors looking at the positioning of their portfolios.

A rugby team comprised entirely of wingers, backs and other ‘flair’ players would likely provide an entertaining spectacle. They could win by huge margin or lose very heavily. A more well-rounded team, that includes players of various types, is likely to provide a better chance of success, though the scoreboard probably won’t tick over so quickly. 

Likewise, a portfolio comprised of a variety of assets with different attributes, some with more risk and others with less, is likely to provide a decent outcome while dampening down the market highs and lows.

Here’s how four investment ‘players’ might perform different roles in a portfolio.

Flanker 

Flankers are all-rounders and have to be everywhere; in the scrum, closing down opposition moves and involved in attacking. Often unheralded, the flankers can be hugely influential and provide a real engine of the team.

Their broad nature and utility purpose is similar to the role of a broad global equity tracker investment: It provides the straightforward exposure needed to help propel long term returns, but with little fuss. 

Winger

Wingers are often the quickest players aiming to finish off attacking play with a dash over the line. They are specialists in sidestepping opponents and dodging last-ditch tackles. 

Wingers, along with the rest of the ‘three quarters’ of attacking players are the equivalent of more specialist actively-managed equity funds in a portfolio. They can provide the flair and knowhow to capitalise on particular opportunities and help drive returns.

Prop

The prop, along with fellow front row forwards, won’t typically be the swiftest player on the pitch. Instead, they need to be steadfast and provide a platform on which the team can build play from line out or scrum.

More dependable and defensive investments such as bonds play a similar role in a portfolio. Often it is safer and more predictable to lend to a business through bonds than be a part owner through shares. Although returns from bonds in the form of interest payments can be unexciting, they can provide steady, incremental returns and a relative anchor compared with more risky share-based investments.

Full back

Full back is something of a hybrid position. When the team is attacking the full back joins in with the other backs in creating scoring opportunities. Yet they can also be the last line of defence against the opposition marauding towards the try line – at least this always seemed the case when I played the position in my youth!

The two sides to the full back’s duties could be equated to the role of gold or gold equities. Highly risky and somewhat unpredictable, they can also provide diversification, sometimes coming to the rescue when other areas are struggling due to economic turbulence. There’s more on gold in this article.

 

Past performance is not a reliable guide to future returns. This website is not personal advice based on your circumstances. No news or research item is a personal recommendation to deal. Investment decisions in fund and other collective investments should only be made after reading the Key Investor Information Document or Key Information Document, Supplementary Information Document and Prospectus. If you are unsure of the suitability of your investment please seek professional advice.

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