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Our investment philosophy
Financial planners like to follow investment philosophies – they’re the guiding principles that govern how and where they invest your money and the approach they feel is most likely to give you the results you want in the long term.
It can sound a lot loftier than it really is. We have an investment philosophy that we follow too, but we like to keep it simple – we use evidence-based investing.
Evidence-based investing
We firmly believe your wealth is there to make the life you want possible, and that to achieve it you need to be in it for the long term. We’re not interested in trying to beat the market, following the flavour of the month or reacting to daily fluctuations in the markets.
We believe in the mathematical evidence of decades of long-term investing experience from academics. That evidence shows us that building a well-diversified portfolio, investing for the long term and sticking to a strategy with patience and resolve is what really pays off.
Our investment philosophy comes down to seven key beliefs.
1. Diversification is really important →
It makes sense to spread your wealth across many different types of investment in a variety of companies, governments, industries and locations. It won’t stop you experiencing volatility, but it will make your portfolio more resilient and better able to recover from downturns. Your portfolio should be cost-efficient, tax-efficient and globally diversified.
2. Risk and return are related (and essential) →
Investing means taking on board some level of risk, in order that it might pay off and increase your returns. They’re inextricably linked – you can’t have one without the other. What matters is finding the level that you’re comfortable with. But we need to remember there are many types of risk, including the risk that inflation eats into your wealth and stops you doing the things you want to do.
3. Costs are overlooked too often →
While everyone’s thinking about share prices, celebrating when they go up and being worried when they take a tumble, not everyone is paying enough attention to costs. Investment costs may seem small, tiny insignificant percentages, but over time they can eat away the returns you’re making. We work hard to keep your costs as low as possible.
4. You can't 'beat' the market →
You’ll find plenty of people who believe they can, but they can’t, not consistently. It’s very rare that a fund manager can stay ahead of economic uncertainties and random events, and research suggests it’s more about luck than skill. The evidence tells us that patience is rewarded and in any case, we’re not trying to ‘beat’ anything – we’re putting in place an intelligent plan to get you to your goals.
5. Believe in the markets →
For all the stories you may read, the markets actually do a pretty good job of arriving at sensible prices. Millions of people buy and sell shares every day and the real-time information that those transactions provide helps to set prices. It’s actually a very effective information-processing machine.
6. Keep emotion out of it →
That might sound counter-intuitive, because we spend a lot of time talking about the things you really want out of life. But setting out your goals is part of building a strategy, once that strategy is in place, emotion no longer plays a part. It can lead to poor, hastily made decisions, especially in extreme market conditions. We’ll be there to help you stick to your plan through the good and the bad.
7. Forget what everyone else is doing →
Try not to benchmark – other people’s successes, failures, experiences and investment journeys have no real relevance to yours, because they’re trying to achieve their goals, not yours. The only progress that matters is your own.