Why your investment portfolio should be like a rugby team

Different investments can work together like a well-rounded rugby team.

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  1. Rob Morgan

Of all the team sports, rugby arguably calls for the greatest variety of attributes among players. Large, powerful forwards are needed, but also quicker, more nimble players that offer the pace and imagination to create scoring opportunities from open play.

A rugby team comprised entirely of wingers, backs and other ‘flair’ players would likely provide an entertaining spectacle. But it would be a high-risk approach: they could win by a huge margin or, perhaps more likely, 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 assets that are all very similar could either do very well or very badly. A better approach is to blend a variety of assets, sectors and geographies to spread your risk around. This can still provide a decent outcome while dampening down the market highs and lows.

For instance, here’s how four investment ‘players’ might perform different roles in a portfolio.

Flanker 

Flankers are all-rounders and are needed 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 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 riskier 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.

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.

 

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This information does not constitute advice or a personal recommendation and you are recommended to seek advice concerning suitability from your investment adviser. The value of investments can fall as well as rise. Investors may get back less than invested. Past performance is not a reliable guide to future returns. Charles Stanley & Co. Limited is authorised and regulated by the Financial Conduct Authority.

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Investment involves risk. You may get back less than invested.