Quarterly investment report April 2019

If you’ve read even a few of these bulletins over the last few years, you’ll have heard this before: We don’t do market forecasts and we don’t make asset allocation decisions based on current events or economic news.

We are relentlessly focussed on helping our clients capture the long term returns of global stock markets for the lowest cost. By following this approach, we believe that the resulting lifetime return achieved will be well above that of the average investor.

We don’t do market forecasts and we don’t make asset allocation decisions based on current events or economic news.

For a recent example of the benefits of this philosophy you only have to look to the end of 2018 when markets experienced several turbulent days.

Between the 3rd and the 25th of December the MSCI AC World Index fell by 12.19%. Many pundits were forecasting this to be the start of the next bear market. The Wall Street Journal said on the 22nd December “U.S. stocks ended a brutal week on track for their worst month since the financial crisis, the culmination of a rout that threatens to halt the longest-ever bull market.” Anyone however, who was suckered in to selling out of equities by the headlines will have missed some or all of the subsequent recovery. Between 25th December 2018 and today, the 29th April 2019, the MSCI AC World Index has gained 18.98%.

This is volatility in action, it’s what happens. It’s noise. Anyone who says they can time the markets is not being honest with you about their abilities.

Remember the mantra: it’s about time in the markets, not timing them.

A positive mindset is key to dealing with difficult times such as those seen in the lead up to Christmas. Instead of stressing about something over which we have no control, learn to embrace it. Remember that it’s volatility that leads to the higher returns offered by equities in the long run.

A great US based website called Visual Capitalist published an entertaining and powerful animation that demonstrates this well.

Notice how the longer the timeframe in question, the more reliable the returns become. This demonstrates that time in the markets generally mitigates the volatility of returns. Over the entire period the real return of the US market, with dividends reinvested, is around 7% – more than enough to power any financial plan.

I really love their last paragraph: “Long-term investors can see that as long as their time horizon is measured in the decades, you can take the odds of making money in the stock market to the bank.”

A 60-year-old reaching retirement in good health has a roughly 50% chance of surviving to age 90. A heterosexual 60 year old couple have a 50% chance of one of them surviving to 96. We’re in this for the long term and must match our view of the markets to the reality of our situation.

Consistency and persistence are key to a good investment outcome. We’re here to help when the going gets tough, please don’t hesitate to pick up the phone.

EWM Portfolio Performance

We aim to give a sense of the performance of our approach by comparing our portfolios to those in the Asset Risk Consultants (ARC) Private Client Indices.

ARC is the go-to index provider for wealth managers, covering 86 contributors, including all the major stock brokers and discretionary fund management firms, and more than 130,000 portfolios.

The size and quality of the dataset means that it is possible to assess performance against a peer group covering all major investment styles, approaches and philosophies.

ARC gathers and publishes data quarterly; it allocates portfolio returns in to one of four categories depending on their risk return characteristics. These are:

  • ARC Sterling Cautious
  • ARC Sterling Balanced Asset
  • ARC Sterling Steady Growth
  • ARC Sterling Equity Risk

This process reflects that one manager’s balanced fund may not be the same as another manager’s balanced fund and aims to compensate for that.

The 6 EWM portfolios combine growth assets (shares in the great companies of the world) with defensive assets (global developed world government bonds and UK inflation linked gilts). The range of portfolios that we maintain ensures that there will always be one suited to the level of volatility that any client is willing to take on. The portfolios are:

  • EWM P0 Defensive
  • EWM P20 Cautious
  • EWM P40 Cautious Plus
  • EWM P60 Balanced
  • EWM P80 Balanced Plus
  • EWM P100 Adventurous

Remember, growth assets are always stated first so P0 Defensive holds no growth assets, P40 holds 40% growth assets, P80 holds 80% etc.

The portfolios are managed systematically, with no judgemental activity at client level as to where or how monies are allocated. Instead, our Investment Committee uses global market capitalisation to determine country allocations. We’re recently written a post going into a little more detail on what the Investment Committee does behind the scenes, read it here.

We then seek to add to the expected long term returns by allocating a small section of the portfolios to emerging markets as well as small and value shares. This reflects the evidence that exposure to these factors has increased returns historically albeit with some additional volatility.

Our process driven approach ensures we are well insulated from common behavioural biases that tend to affect investors.

Although the EWM portfolios are not directly comparable to ARC for the reasons outlined, it’s interesting to reflect on the 3 year risk and return metrics shown in the scatter graph below:

Represented in a chart: –

Portfolio / PCI Risk relative to world equities % Tolerance bands % 3 year volatility % 3 year return%
EWM P0 0 2.43 6.90
EWM P20 20 3.62 14.75
ARC Sterling Cautious 0-40 0-50 2.92 8.82
EWM P40 40 5.46 22.35
ARC Sterling Balanced 40-60 30-70 4.65 15.12
EWM P60 60 7.20 29.47
ARC Sterling Steady Growth 60-80 50-90 6.24 22.78
EWM P80 80 8.79 36.38
ARC Sterling Equity Risk 80-110 70-120 7.51 28.34
EWM P100 100 10.20 42.95

Finally, we include a summary of three year performance of the portfolios, with reference to the global stock markets as measured by the MSCI All World Index and GBP cash as measured by the UK One Month Treasuries Index.

Please remember your portfolio performance is likely to be different to the returns shown above because you will have invested at a different time and there may be cash flows in or out of your portfolio.


  • All data sourced by EWM from FE Analytics as at date shown. Past performance is not a guide to the future.
  • The information in this bulletin does not constitute investment or financial advice in any form. No responsibility is taken for any action or inaction taken by clients solely in relation to this information.
  • The bulletin is published for educational purposes only.
  • We are not responsible for any content on – or embedded from – third party websites.

About the Author

Dom is a qualified and experienced Chartered Financial Planner (CII) and Chartered Wealth Manager CFP (CISI) and a Registered Life Planner (Kinder Institute) with over 30 years experience. His work primarily focuses on retirement income planning, helping clients to maintain financial dignity and independence in retirement. Read more from Dominic...
This article is distributed for educational purposes and should not be considered investment advice or an offer of any product for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed. Past performance is not indicative of future results and no representation is made that the stated results will be replicated.
Thank you again for the caring way you have dealt with our Auntie V and her finances. It's a great weight off our minds and she is very happy with it too. P.C. (Wallingford)

Expert Opinion…

Mindfulness – An Evening with George Kinder Replay

Jonathan, September 21st, 2020

Jonathan and Dom met George Kinder over 10 years ago when they were becoming increasingly disparaged by the way Financial Planning was evolving in the UK. They felt there must be a better and more connected way to help people with their financial futures. After providing such insight, they have kept in close contact with George which has led to developing our fundamental ethos at Expert Wealth Management.

Read More
Join The Expert Wealth Family As A Paraplanner

Jonathan, September 10th, 2020

You will be working for an Independent Financial Adviser who hold corporate Chartered Financial Planner and CISI Accredited Firm status, as part of a small team looking after the financial planning needs of around 200 client families. As Paraplanner you will be providing high quality support and ensuring complete and accurate records […]

Read More
Cash dividends: don’t bank on them

Jonathan, August 24th, 2020

‘Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.’ John D. Rockefeller To this day we can still relate to the words of American industrialist John D. Rockefeller, despite their utterance over a century ago. Be it a privately owned business or publicly listed […]

Read More
T: 01993 772467      E: advice@expertwealth.co.uk

Expert Wealth Management, West Wing, The Old Dairy, High Cogges Farm, Witney, Oxfordshire, OX29 6UN

Your Protection: In the unlikely event of your ever having a complaint which we have not been able to resolve amicably, you have recourse to the Financial Ombudsman Service (FOS). This is an independent body which will investigate complaints at no cost to you.  The FOS website is www.financial-ombudsman.org.uk.