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Don’t accept unnecessary risk

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By Michael O’Connor, theislandinvestor.com

I always advocate for long-term investing, but this buy-and-hold narrative can be misinterpreted as 'do absolutely nothing'.

I disagree with this take, and if your financial advisor has made no changes to your portfolio over the last few years, you should probably go shopping for a new one.

We had the most predictable and forecast interest rate hiking cycle over the last 18 months. If your portfolio was left sitting in bonds when negative asymmetric returns were clearly on the table (only downside), then you need to be asking some questions.

There is a difference between patience and incompetence. Unfortunately, over the short term, the two are indistinguishable.

If your financial advisor hasn't made any changes to your portfolio because they believe that 'time in the market' is all that matters, that's perfectly fine. That is an investment approach that has been successful for so many. But why are you paying them to sit on your money when you can just invest that money directly yourself on any online brokerage? If the middle-man isn't adding value, remove them.

Check your exposure

Just because you're a long-term investor doesn't mean you need to blindly reach for returns. Tactically adjusting your portfolio to mitigate against obvious risks on the table is an important part of the investment process.

With that said, growing expectations around a recession should not be seen as a 'sell everything' event. You simply need to reassess where your exposure lies.

Ensure you are invested in companies with;

Strong 'Net Margins': Improving revenue is great, but it needs to make the business more profitable. Far too many companies are spending more than they are making, all in the name of customer acquisition. This 'growth at any cost' tactic was rewarded when money was free, but with credit standards tightening and interest rates jumping higher, the endless growth narrative is about to catch up on many of these 'high growth' names.

High 'Free Cash Flow' Margins: In its simplest terms, free cash flow is just the cash that can be taken from a business without disrupting the operations of the business. Importantly, this number factors in the cost of growth. So, if a business is growing and has a good FCF margin, it should pique your interest.

Stable Return on Invested Capital (ROIC): ROIC is just the profits a business makes on the money invested into it. The premise is pretty straightforward. You want to invest in companies with a history of using their equity to generate more profits. Looking at companies with sky-high ROIC can be compelling, but what you want to see is a consistent history of stable ROIC over time. Ignore the once-off data; always analyse the trend.

You can find all this info on any company by simply typing the company's name into sites like stratosphere.io.

Be selective in the risks you take.

My portfolio

I have moved to underweight equities with a focus on quality and energy.

The remainder of my holdings have been moved into short-term treasuries, with a very small portion in long-term treasuries with zero corporate bond exposure.

I also hold roughly 20% in a short-term tactical portfolio mostly made up of distressed financials, tech and mining, but I would categorise these as bets more than investments and not something I necessarily recommend doing.

If you have any questions, please don't hesitate to reach out.

To get my latest 10 stock recommendations, sign up for my newsletter by scanning the QR code or go to www.theislandinvestor.com.

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Fassbender ready for second Le Mans appearance

Local Hollywood A-lister Michael Fassbender is in the final preparation stages for his second appearance at the legendary 24 Hours of Le Mans. The iconic endurance race is celebrating its […]

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Local Hollywood A-lister Michael Fassbender is in the final preparation stages for his second appearance at the legendary 24 Hours of Le Mans.

The iconic endurance race is celebrating its 100th edition next weekend.

The Fossa star has already arrived in the famous French twon where he is involved in a week-long series of engagements including drivers’ parades, autograph sessions and more serious appointments like car safety checks, practice and qualifying.

Like last year, when he finished 16th in the LMGTE Am class, Fassbender has been entered in to the event by the German Proton Competition team with Estonian Martin Rump and the Austrian Richard Lietz.

Fassbender dreams of following the trajectory of fellow Hollywood actors Patrick Dempsey who was second in LMGTE Am class in 2016 and Paul Newman who finished second overall in 1979.

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Ireland’s oldest citizen has Killarney connections

Ireland’s oldest woman met with President Michael D. Higgins at Áras an Uachtaráin this week. Máirín Hughes, who turned 109 on May 22 has strong Killarney connections. The previous record […]

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Ireland’s oldest woman met with President Michael D. Higgins at Áras an Uachtaráin this week.

Máirín Hughes, who turned 109 on May 22 has strong Killarney connections.

The previous record was held by 107-year-old Nancy Stewart who died on September 10 2021.

Although born in Belfast, Máirín went to school in the Mercy Convent. Her father was a customs and excise officer and the family moved around a lot eventually coming to Killarney after spells in County Down and Dublin.

Her mother came from the Rathmore area and her father was from Newmarket in County Cork.

She attended the Mercy Convent and has, in previous interviews, recalled growing up on the shores of Lough Lein.

“Neighbours who had three children were given the job of taking me to school,” she said. “They were annoyed because the children were going to school for two or three years but I was put in to the same class as them – my mother had taught me.”

In 2021 she featured in the book ‘Independence Memories: A People’s Portrait of the Early Days of the Irish Nation’, sharing stories of being kept in school in Killarney during an attack on the RIC barracks down the road.

In 1924 she started a degree in science and a diploma in education at University College Cork, before working in the pathology lab in University College Cork’s Department of Medicine for 16 years.

last year she recalled her story on the podcast: ‘Living History – Irish Life and Lore’.

During the broadcast she talked about her parents’ membership of the Gaelic League in 1910; the Spanish Flu in Ireland in 1918; The Black and Tans in Killarney in 1921; the early days of the new Free State; Eucharistic Congress in Dublin in 1932, visiting the Basket Islands in 1929; and working in the UCC medical laboratory from 1932 until 1948.

This week President Michael D. Higgins hosted an afternoon tea event to celebrate the important role that a variety of people have and can play in different communities and Máirín was among the guests of honour.

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