So what would ensure that your funds remain profitable? The exit strategy. Once you have loyally invested 2-3 funds, you establish a timeline, generally one year, to review performance. You execute your plans according to this timeline. These are generally my bullet-points:
- if a fund gives a loss of more than 25%, I take the loss and switch
- if a fund stays stable at a profit of at least 20% for the last 5 years, I switch to the top performing fund at that time and book my 20% profit
- if a fund gives me excess profit of 30%, I book profit and stay put at this fund
The yearly review is because I do not want to spend too much time on investments, but may be you could do it in a semi-annual or quarterly cycle (anything less means you are obsessed with money). Your timelines also change. Here is a general directive I would follow for timelines when my review cycle is 1 year:
- less than 30 years of age: 8 years
- more than 30, less than 60 years: 5 years
- more than 60: 3 years
If discipline is maintained, your money should keep you happy (and don’t expect to buy a Rolls Royce at age 75 – those retirement benefit ads are generally misleading about the billionaire funda).