The myth
If you’re lucky enough to have the opportunity to see a profitable investment portfolio, it can look like a blueprint for success. After all, it’s been proven to be effective, so copying it would seem to be an effective way to invest.
That’s why many people believe that copying a successful portfolio is always a good idea.
Why do people believe it?
There are risks and uncertainties that you face when you make investing decisions, and it can be tempting to offload those decisions to someone else by copying their winning formula. This is especially true if you trust that person’s investing experience.
It might seem that following a successful portfolio means that you wouldn’t have to do much research and analysis on your own, so you could start quickly and without stress.
Risks of believing this myth
While it can look like there are no downsides to copying a successful portfolio, the reality is actually a little different.
One thing to remember is that the person made that portfolio with a goal and time horizon in mind. If your goals aren’t the same or you’ll need the money at a different time, the same portfolio wouldn’t work for you.
The portfolio may also contain assets that don’t match your risk profile. If you put your money in these products, you might be taking on more risk than you are comfortable with.
Remember that there is no guarantee that you will get the same results. Time makes a lot of difference in investing, and you’ll be starting later than the person whose portfolio you’re copying. There’s also a chance that the portfolio’s performance will go down.
Verdict: It depends.
While copying a successful portfolio can look like an easy way to invest, it won’t be the case unless your goals and situation are exactly the same as the person whose portfolio you want to follow. Even then, there is no guarantee (and things could still go wrong).
Most of the time, it would be better for you to learn what you can from the portfolio and use this knowledge when you make your own.
Making your own portfolio based on your goals, time horizon and risk profile is much more likely to get you to where you want to go. Plus, the experience you get from your decisions is essential for you to become a better investor.
