Investment Reflection Paper

Reflection 1 Investment styles

My investment style has been shaped mainly investing for two different purposes: investment of personal savings and as a voluntary member of the Board of Directors for a $15M pension fund in one of the companies I used to work. For personal purposes, my investments were allocated in the following asset classes: real state (owned house and commercial rent fund), mutual funds (mainly invested in low risk funds and managed by a Pension fund firm, such as Old Mutual) and equity investments that I managed myself.

I have to admit that I did not have any idea about any investment style. The limited local companies to trade in Colombia, made my style very close to that used by Peter Lynch. I invested mostly in companies I knew well, either because I had

First, how asset allocation requires to have a good balance between the investment opportunity set, my investment objective and my tolerance for risk. Second, the fact that the main objective for asset allocation is to spread efficiently my investments, achieving my objectives with the least amount of risk. An third, the clarification about the difference between asset allocation and security selection; the former showing how to allocate across asset classes and the latter how to do it within asset classes. 5 All three insights, helped me fill gaps I had with asset allocation concept, helping me identify adjustments towards a more efficient portfolio.

I found particularly enlightening how asset class returns are extremely variable throughout the time, as it was shown in the data presented by Parfect (2016). 5 Additionally, I understood that timing and deep knowledge of financial cycles play a key role on the overall portfolio performance. Thus, to be able to improve my investment results, I should allocate a great attention not only to the asset classes themselves, but to the particular cycle affecting each