Investments
Successful Investment Experience
Our company’s investment philosophy has been developed from more than 20 years professional financial experience and the world’s most highly regarded academic research. Our core investment beliefs are summarised below:
Risk & Return are Related
There is no such thing as a sustainable high return, low risk investment. We believe the long-term investment returns from each asset class will see shares out-perform property and property out-perform fixed interest investments that in turn will out-perform cash. Similarly, shares are more volatile than property; property is more volatile than fixed interest investments that are in turn more volatile than cash.
Markets Work
This means that knowledge and information about the investment markets flows freely to all participants. As a result, it is essential to understand that you must generally take greater investment risk in order to achieve higher returns. Simply, if Markets didn’t work then active managers will out perform regularly, however they don’t consistently beat the market.
Asset Allocation and Structure Determines Portfolio Performance
Academic research points to asset allocation and structure as the main emphasis of portfolio performance. Expected portfolio returns are shaped by how much is invested in fixed interest vs. shares & property. The expected return from fixed interest is largely a function of the time to maturity and quality of the organisation backing the security. The expected return from shares depends on the proportions invested in domestic vs. international shares, in value vs. growth shares, and in small vs. large shares.
Diversification is the Only Free Lunch for Investors
Combining asset classes with different return characteristics will reduce the volatility of returns from an investment portfolio. Maximising the number of specific investments within each asset class rather than attempting to select the “best” of the future will also reduce the volatility of returns. Neither of these strategies will reduce significantly the final investment outcome.
Discipline is Essential
Successful timing of investment decisions (when to buy/sell or predicting which asset class will be next years best performer) is very difficult if not impossible to achieve on a regular basis. Attempting to perfect this art is the main reason people’s investment plans fall apart. The ability to focus on and continue with long term plans during periods of unfavourable investment markets will determine whether people experience successful investment results.
In summary, logic and statistical evidence overwhelmingly favour an investment approach based on these principles. The returns are higher and the fees are lower and people’s investment outcomes are more likely to be achieved.