Our investment philosophy
We believe that investment decisions should be guided by the wealth of evidence available to us. We define a successful investment experience as one where our clients can sleep soundly at night, have a strong chance of achieving their future goals, and both understand and believe in the investment journey they are taking.
Our core beliefs
1. Markets work effectively
The market mechanism for pricing financial assets does so in a broadly efficient and fair manner, based on supply and demand, as in any market. We expect that the price of a company’s shares should closely reflect all the information known about it, at any point in time.
2. Risk and reward go hand-in-hand
There are few free lunches in investing. If a client needs a higher rate of return to achieve their financial goals, they will, inescapably, need to take on a higher level of risk in their portfolio. We also believe that if an investment looks too good to be true, it probably is.
3. Diversification is crucial
Not putting all your eggs in one basket is an intuitive and valuable concept. We use diversification broadly in client portfolios, spreading risks across individual securities (equities and bonds), geography and by investment type.
Our practical principles
1. Structure a successful client portfolio
Building the right portfolio structure for a client is the central focus of our process. Our role is to fully understand the risks that we are happy for our clients to take and to combine them in a way that delivers them with a strong chance of achieving their investment goals.
Above all, a portfolio must be suitable for the client and their circumstances. Considerable effort is focused on ensuring that the portfolio structure is suitable in terms of a client’s willingness, capacity for and need to take on investment risk.
2. Manage costs effectively
We believe that costs come in two forms: financial and emotional. From a financial perspective, our approach focuses on minimising investment product and transactional costs. In our view a systematic, non-judgemental approach to investing in low-cost investment funds should deliver the bulk of the return to the investor. Costs matter with investing; you get more of what you don’t pay for.
From an emotional perspective, our disciplined approach to the ongoing management of client portfolios, along with ongoing expectation management and education, helps to reduce the emotional costs of weak and poorly timed emotional decisions.
3. Manage risk tightly
Our approach to investing positions us as risk managers, rather than performance managers as advisers have traditionally been. Our risk management is divided into three key areas: rebalancing, product due diligence and ongoing governance.
We rebalance portfolios back to their original mix of assets on a regular basis, forcing the unemotional sale of assets that have done well and reinvestment in assets that have done less well. We also ensure we have undertaken strict due diligence before any product is recommended to our clients. Finally, our formal Investment Committee meets regularly to review a broad range of risks and issues that can impact our clients’ portfolios.
The basics of investing
Watch our series of videos to explore more about the ins and outs of investing.
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