Key investment principles

Diversification by asset class

Diversification allows to limit losses in case of a sharp decline in performance or company failures. There are opportunities for diversified investments that cover the whole world and it is recommended to consider a global portfolio as a base. The overweight of the United States in global market capitalization can be limited by supplementing the portfolio with exposure to more specific markets.

Diversification by currency

If you wish to make a medium-term investment involving a payment in another currency, if your currency is under-represented in existing investments or if your retirement expenses require a particular currency, you can also put your money in an investment exposed to a specific currency (e.g. EUR or CHF funds).

Active and passive management

Stock picking means choosing a limited number of stocks and market timing means that you buy or sell at a specific time in the hope of making a profit: This selection of investment and timing is called active management. Numerous studies have revealed that on average, the investor will lose his bets with the market, as investors are unable to consistently beat the market. In contrast, with passive investing, you invest in a collection of stocks representing the market. These collections of stocks are called indices. Passive investing is appropriate for most investors, especially beginner investors, and offers the following advantages:
1. Better performance than active management over the long term;
2. Fees: Lower on index funds than on active funds;
3. Superior diversification;
4. Transparency: As John Bogle of Vanguard used to say, there’s no point in looking for a needle in a haystack, you’re better off buying the whole haystack.

Controlling investment costs and taxes

The good performance of an investment is impacted by some actors without any possibility for you to limit their intrusions, such as internal company costs and some anticipated taxes. Others, such as the choice of investments and platform, allow you to limit the costs and taxes of investment, as we will see in the practical guide below.