Investment Our Way

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As Independent Financial Advisers with discretionary permissions we are perfectly positioned to manage your life savings. We believe you can no longer simply invest in a plan or policy with a large faceless company and leave it until maturity date, hoping for a good outcome. You need advice when you invest and then you need professional, personal investment management on a continuous basis to ensure your savings remain safe and continue to grow in line with your requirements and expectations.

We will assess your capacity to deal with short term fluctuations in the value of your investments and we will confirm our findings by email in “risk & return” prior to any investment with us. This document describes the lengths we go to, to ensure you invest in a manner comparable to the level of risk you are willing and able to take.

There is a wealth of investment theory out there which we have investigated. Our evolving investment philosophy is described in Why we invest the way we do.

We continually change your investment holdings, always searching for the optimum return within your stated attitude to investment risk. Of course as Independent Financial Advisers it is our job to continuously monitor the entire Investment Universe which includes both index-tracking funds and those managed by teams of fund managers. Our belief is that for the vast majority of investors, superior returns are achieved in the medium to long term by minimising the costs. Your costs can be minimised by selecting the majority of your funds that simply track market indices instead of employing teams of fund managers to actively select from the exact same indices.

We use trackers and actively rotate them to suit where we are in economic market cycles. We believe simply buying and holding as a method of growing your capital is dead.

In the 1980’s the US stock market ended every year higher than it started. Investment was easy. In the 1990’s the market again ended higher 8 years out of 10. Since 2000 there have been as many years that ended higher than years where you would have lost money.

Increasingly markets are more volatile. Investment sentiment is driven by herd instinct. When markets are rising strongly the momentum continues as late-comers feel they are missing out. This drives the markets too high and corrections subsequently occur. Once the level falls, inexperienced investors panic and pull out, driving the level even lower. This herd instinct destroys value if an investor becomes involved. Of course it is hard to predict everytime the herd is going to spook; but by regularly taking profit when markets look high and patiently waiting for value before funds are purchased, better results can be achieved.

Occasionally we will select a fund where local expertise is paramount and is worth paying for. It is also impossible to invest in a “bricks and mortar” commercial property fund on a passive basis. Every fund exclusively owns different properties and these have been individually chosen by a fund manager.

Our current investment fund recommendations will be detailed to you in your suitability report. You will be invested across enough funds to optimise your return whilst reducing your risk. The funds we choose will be detailed to you prior to investment.

You may have seen offers of guaranteed results. Unfortunately our’s are not. Over the medium to long term the investment return you are likely to receive depends upon the level of risk you are prepared to take. In short, risk and return are linked. There are indeed many Structured Investment Products in the marketplace which aim to give you a “Guaranteed” return. As the small print of each product runs to dozens of pages I have always been deeply sceptical of these products. If returns are definitely guaranteed, why can’t this be confirmed on one sheet of paper? As an Independent Adviser it is my job to consider all investments and use them on their merits, if they are suitable for the client. However there are plenty of investment opportunities which are not so synthetic and often contrived purely for provider profit.

Our investment process is based on Modern Portfolio Theory,{{2}} and ongoing research which confirms that most investment return is derived from holding the correct type of assets {{3}} over the correct timeframe. So asset allocation, splitting your capital and investing it in different types of assets, is fundamental to our process. In theory not all asset classes do the same thing at the same time. When one type of assets rises, another may rise with it, however another may fall. Indeed, some types of assets are not affected by any other types of asset at all. Spreading your capital across a wide range of assets brings diversification, and diversification is the key to safety. Put simply we do not put all your eggs in one basket.

Research suggests that market-timing accounts for less than 2% of your long term investment return. However in the short term 2% can make all the difference. If you are investing new money currently held in a bank or building society account we will use our experience to try to obtain good value by recommending the timing of your investment purchases for you. We can do this because we are authorised to use our discretion. We shall do this in practical terms by phasing your investment.

This is where your investment is gradually placed into funds, rather than all at once. Your capital will be split and invested in tranches over several months. (Subject of course to the markets offering fair value. If not, cash holdings could be maintained for a longer period).

Our Investment Management is continuous. We review investments continually and we will review your situation regularly to help you achieve your financial goals. This is mainly achieved by annual planning meetings, but if your circumstances change in the meantime, or if you are at one of those times in your life where a major financial change in direction occurs, the meetings and contact will be much more frequent.

You will receive regular valuations of your investment portfolio both from the Wrap Platform or SIPP provider and from us.

[[1]]What do you define as savings?
Economic theory defines savings simply as deferred consumption. You have decided not to spend the money just yet. This money is often allocated into medium to long term savings plans. You will know them as ISAs, pensions etc.[[1]]

[[2]]What is Modern Portfolio Theory?
MPT was pioneered in the early 1950’s. The theory states that for every level of risk there is a portfolio with the highest expected return and for every level of return there is a portfolio with the lowest anticipated risk. We would be happy to provide you with a detailed paper upon request.[[2]]

[[3]]What’s an Asset?
An asset is simply an item that tends to go up in value over time. A property is an asset, shares are assets, as is a fund that holds precious metals.[[3]]