At our core, we firmly believe that adopting a systematic approach to investing is the key to a successful investment journey. Rather than relying on empty promises, we emphasize the importance of evidence-based and logical guiding principles that lay a solid foundation for a sensible investment solution.
In this article, we present five invaluable insights from esteemed academics and practitioners that shape our investment philosophy and explain how these principles help us navigate the world of investments with confidence.
1. Risk Management: Focus on Stability, Not Performance
Warren Buffet once quipped, “You don’t find out who’s been swimming naked until the tide goes out.”
While the media tends to glorify top-performing fund managers, we understand that sensible investing requires a “risk-first” approach. By carefully considering risks and their potential rewards over time, we create portfolios that prioritize stability. This involves strategically selecting the risks we wish to be exposed to, such as broad global equity market risk, while avoiding unnecessary risks like leverage. Vigilantly monitoring and managing these risks forms the cornerstone of our investment strategy.
2. Diligence and Rationality: The Path to Success
In the words of author and investment guru, Charles D. Ellis, “Activity in investing is almost always in surplus.”
Emotional reactions often lead to impulsive and detrimental investment decisions. To achieve success, we emphasize the importance of diligence and rationality. By approaching decisions with a level-headed mindset and avoiding knee-jerk reactions, we protect ourselves from falling victim to the pitfalls of emotional investing.
3. Embrace Capital Markets: A World of Opportunity
Nobel laureate Eugene Fama advises, “You’ve got to talk yourself out of the market portfolio.”
Investing in the capital markets allows us to participate in the long-term growth of companies worldwide, providing an effective means to build wealth over time. By diversifying our investments through mutual funds, we gain exposure to a broad range of companies, avoiding overreliance on any single stock.
Today, investing in capital markets has become easily accessible, allowing investors to harness the potential of global growth.
4. Keeping Costs in Check: Unlocking Value
The founder of Vanguard, John C. Bogle famously said, “In investing, you get what you don’t pay for.”
While costs are not the sole determinant of investment success, they play a significant role. Whether they are implicit, such as trading costs, or explicit, like fund manager fees, costs can erode returns over time.
By keeping costs low, investors retain more of their hard-earned money within their portfolios, preserving their wealth.
5. Stick to the Plan: A Roadmap to Success
One of the world’s greatest investors, David F. Swensen, once said, ‘Real-world application of fundamental investment principles produces superior outcomes.’
Investors who adhere to key investment principles are better positioned to avoid costly mistakes. By following the guidelines laid out by investment experts, we empower ourselves to implement a robust and repeatable process for managing our wealth.
Five observations by five legendary investors and respected academics, each one reflected in the systematic strategy we deploy to manage and grow your family’s wealth.
By embracing these insights, we forge a sensible investment philosophy that guides our journey towards financial success. Prioritizing risk management, acting diligently and rationally, participating in capital markets, keeping costs low, and sticking to our well-defined plan empower us to make informed decisions and achieve superior outcomes.To learn more, take a look at our investment director, Graham McCulley explaining our approach in this short video.
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