Investment Philosophy

Here are the core principles that underpin our investment philosophy:

• We believe in investing, not speculating.  Whilst speculating can be fun you should not use investment capital to speculate.

• We do not believe there is merit in market timing and stock or fund selection.  Our approach is clear in that we maintain a disciplined approach that helps our clients get from A-Z.

• There is a world of difference between speculating and investing and our process helps to reinforce the latter and remove the gambling from your investment experience.

• Over 90% of investment performance is derived from asset allocation decisions, not market timing or stock selection. Brinson, Beebower and Singer 1991

• Over the past 20 years, 82% of active funds failed to beat the benchmark FTSE All-Share Index (The WM Company (one of the world’s leading investment performance measurement businesses), April 2004)

• The ‘best’ funds display consistent risk-adjusted returns combined with low charges

• Our clients should know and understand the reasons for investing in every part of their portfolio.

Although they can play a valuable role we do not believe that active management strategies consistently add value for the individual investor.  We believe that long-term investment objectives can best be achieved by maintaining a disciplined policy of asset class diversification.  These goals can be best achieved by investing client assets in institutional asset class vehicles for the long term, supported by regular rebalancing to ensure that allocations stay within strategic parameters.

Investment Process

We always follow a comprehensive five stage investment advice process to ensure the consistent delivery of excellent investment advice:

• Setting objectives linked to your Financial Planning goals.

• Understanding your attitude towards investment risk, reward and volatility.

• Agreeing on an asset allocation strategy which will form your base investing position.

• Selecting suitable funds to populate the agreed asset mix.

• Following a pre-agreed review process which includes rebalancing asset allocation.

Asset Allocation

Asset allocation is the mix of underlying asset classes held within an investment portfolio.

There are generally understood to be four main asset classes – cash, fixed interest securities, property and equities. Each asset class behaves differently with very different risk profiles.

Various academic studies have shown that asset allocation is the single most important factor in determining the returns of an investment portfolio. Secondary factors like fund selection or market timing are less important when compared to being in the right asset class (or mix of asset classes) at the right time.

Some fund managers do add value, but unfortunately it is virtually impossible to pick those fund managers who add value on a consistent basis.  If you pick a ‘winner’ this year the odds are that it will be performing below the sector average after that.

Having established the correct allocation, we then needed to apply modern techniques to ensure the greatest probability that you will earn the return that is appropriate for the level of risk that you are willing to assume.  In doing so, we have placed our reliance in principles established by a collection of actual evidence and theory from the academic disciplines of economics and finance.  This is a body of work referred to as Modern Portfolio Theory (MPT).