Asset allocation: the key to successful investing

Many believe successful investing is about picking the right stocks or timing the market perfectly. But the truth? How you build your portfolio matters far more. In this video, Richard Flax, our Chief Investment Officer, explains what Asset Allocation is, why it’s so important, and how we approach it at Moneyfarm to help you grow your wealth over time. If you prefer, you can also find a written version below.

When you think of a successful investor, what comes to mind? Maybe someone who picks the right stocks or trades actively. 

But… if we look at market history, the reality is a bit different. What really makes the difference is how your investments are put together: your portfolio.

And Asset Allocation is the key to building a solid portfolio. How you structure it. How you balance it between stocks, bonds, cash and other instruments. What changes you make. Asset Allocation is about choosing which instruments to use, and in what proportions. 

As a rule of thumb, stocks can grow your investment significantly, but they can be volatile. Bonds offer stability and, these days, a decent yield. Cash is there for emergencies. It’s not quite that simple, but it’s a decent approximation.

At Moneyfarm, we build this for you – combining data, human insight and a clear understanding of your goals.

And we should remember that picking stocks is hard. Doing it consistently is even tougher. According to one study from S&P Global, 84% of US equity managers underperformed their benchmarks over a ten-year period.  

That’s also why diversification is so important. Don’t put all your eggs in one basket. If one investment underperforms, others are there to help balance things out.

There’s been a lot of debate over the years on the right allocation for a portfolio. We think it’s not just about picking a static portfolio. History suggests that tactical decisions do make a difference. 

There’s also another factor that often gets overlooked: costs. Markets are hard to predict, but costs aren’t. They’re certain, measurable, and over time, they can have a big impact. Keeping your costs low and avoiding excessive trading helps improve your net returns.

So rather than looking for the perfect stock, or trying to time the market, we think it’s better to start with a solid structure and build on that. 

And that’s where we come in. Behind our portfolios is a team that stands by your side while analysing, debating, stress-testing and making decisions. We monitor markets, analyse scenarios, and build robust, diversified portfolios with costs in check. 

We want to combine a strategic Asset Allocation for the long term, with tactical tilts to capture opportunities and manage risk. And because markets constantly evolve, we continuously adapt our analysis and decisions to navigate what’s next, ensuring your investments remain aligned with both your objectives and a changing world.

Markets are never a straight line. There are bumps and sudden changes. Our job is to manage risk, capture opportunities, and stay on course to help you achieve your long-term goals.