David French | 18/02/2009 4:07:25 PM

A buoyant stockmarket convinces some people that investment success comes easy. One person recently said she was prepared to take more risk now the market was performing better. Risk tolerance is something established independent of market performance. It is simply not possible to judge when the next serious correction might be, and investors have to be comfortable with the way their portfolio behaves during such a downturn. While a diversified portfolio will generally offer some exposure to better performing sectors, loading up on glamour stocks is exactly the thing that caught many investors out when the dot.com bubble burst in 2000. Client after client, and study after study, show that a well constructed portfolio is not only the best defence against market downturns, it gives the best opportunity to generate long term wealth. Memories are short, but as it says in the good book, sooner or later greed will get you into trouble.

The Investment Collective (AFSL 471728) is a non-aligned financial planning and investment firm specialising in providing tailored financial and investment advice for individuals and small business. Capricorn Investment Partners Limited's services include financial planning, share trading, portfolio management, insurance broking and self managed super fund administration. Additional information on services provided by The Investment Collective Limited can be found by following this link. Readers are reminded that this document has been prepared for general information purposes only, and any advice contained herein has been prepared without taking into account your financial objectives, situation or needs. Readers are advised to see their financial advisor prior to acting on any general advice.

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