PI Financial - experience. driven. 7 Steps to A Better Portfolio

7 Steps to A Better Portfolio

7 Steps is a rules-based, systematic investment approach to help keep you focused on the variables you can control, to better manage the variables that you cannot. The 7 Steps encourage a process of critical thinking regarding the design, construction, investment selection, and management of a portfolio.

By providing a formulaic framework to evaluate the benefits and drawbacks of investment decisions, the Steps are like a road map to guide you through the endless noise and keep you focused on the journey ahead.


Successful, long-term investing will be determined by the quality of your decisions and the framework or structure with which to evaluate those decisions. The quality of your decisions will depend on what information is evidence based and what is opinion based. An intelligently structured and disciplined portfolio approach will provide consistency, help you manage variables, and reduce the impact of investment noise.

An investment strategy is about the odds. You are tasked with employing an investment strategy that captures the returns and manages the risk of a given market to increase the odds of a successful long-term investment outcome.


The objective is to utilize a portfolio approach that captures return and manages risk to increase the odds of meeting current and future cash flow requirements.

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7 Steps:

  1. Allocate across global capital markets
  2. Diversify broadly within markets
  3. Focus on higher expected returns:
    1. Value
    2. Small cap
    3. Profitability
  4. Utilize financial science
  5. Manage strategy risk
  6. Manage investment choice risk
  7. Manage costs and taxes

Focus:

  • Long-term – rather than short-term
  • Proactive policy driven approach – rather than forecast driven
  • Pragmatic – rather than idealistic
  • Rules-based systematic strategy – rather than indecisive
  • Evidence-based research – rather than intuitive 
  • Current and future cash flow requirements

7 Steps is an investment decision making framework to help investors be more accountable, build emotional resilience, encourage forward thinking, and instil confidence as they journey into the uncertain world in investing.