The average investor suffers from many problems. They pay higher fees, they get less information, they aren’t as educated in regards to investments, etc. Basically they are for the most part at a huge disadvantage to the professional investor. One of the great issues is that of not having and sticking to a vision. Most investors think that their portfolio is structured well and that they are in a good position to profit from their long term views. The truth is that most of the time the portfolio has drifted so far away from the original idea that an outsider looking in would have no idea what the investor is going for.
Say for instance that you have a long term view that emerging markets will continue to grow. How can you assemble a portfolio to take advantage of this? And how do most investors drift from this? Most investors will put together the portfolio and then the moment that one of the positions is down they will sell it and then go find some new stock that they just saw on TV. What happens is that over the span of a few months their portfolio is not represented of their long term views.
So how do you assemble and manage a portfolio to profit from your long term views? Well taking the example of emerging market growth you would look at going long several of the different emerging market country ETFs. You might buy some Brazil, Russia, India, China, Chile, South Korea, etc. Or you might just buy an emerging market ETF and then buy some of the individual country ETFs where you see even more opportunity.
The next step is to look at what else will benefit from growth in the emerging markets. Most traders would agree that if the emerging markets are to grow that most commodities will go up as well. You can buy some of the commodity futures contracts or the ETF for the respective commodity. You can also buy some of the different food, energy, and metals companies that supply everything to the emerging markets.
By looking broadly at the investment landscape you will have a better constructed portfolio and you will be better able to stay your course. Every month or quarter go in and look at individual positions and if they no longer fit your view then get rid of them but make sure that you replace them with a new position that still follows your theme. More money has been made following global macro themes then from an eclectic and random portfolio.