Our Investment Philosophy
Helping you become a smarter investor.
We apply a considered, rational approach to investment, based on long term evidence and academic research.
This is spelt out in detail in our guide “Intelligent Investment: Key Principles for Investing Real Money in the Real World”. Or for a shortened guide please click here.
Briefly, the key points behind our investment philosophy and its outworking are as follows:
- Risk and return go hand in hand.
- Free markets are efficient.
- Diversification helps optimise returns within a given risk profile.
- Rebalancing enhances returns and further controls risk.
We have found that:
- No-one can consistently:
- Pick the “right” stock,
- Time market movements, or
- Select the best asset class to be in next.
- On average, conventional active managers underperform the market in which they invest.
- Passive and Tracker funds are a better way to gain market exposure.
- Funds based on academic research, which capture the real drivers of market returns, (what we call "passive plus" funds), are better still.
In order to apply these principles to a client's situation and meet their needs, we should answer three key questions:
- How much capital should be held in each "asset class" (e.g. shares, bonds, property, cash etc)
- What tax structures are most appropriate?
- Which funds should we use to populate the portfolio, and within which wrappers should we hold them for optimal effect?
If you want to read something thoroughly sensible, but even longer, try "Smarter Investing- Simpler Decisions for Better Results" by Tim Hale. (available from all good book shops!)
We trust our Philosophy is based on sound thinking and academic research- not gut feeling, vested interest, or expensive lunches. Those who are interested in digging further might find some of the research and articles on Dimensional Fund Advisers (DFA) website interesting.