Proof that investment decisions can go either way, is always yelling at us from the pages of our papers as well as from the TV or radio. Indeed, just in the last few months, we’ve witnessed the financial downturn in China as well as oil, VW and Glencore hitting the headlines with unexpected and alarmingly dramatic changes in price. It’s probably fair to assume investors with exposure to assets such as these might well be licking their wounds and cherishing regrets. Not that regrets ever recoup losses, and of course we’d all be a lot better off, wouldn’t we, with hindsight?
Many investors follow a strategy that relies on their own (or someone else’s) assessment of the present, alongside forecasts for the future. However, in doing this, they’re taking a completely blank drawing sheet onto which they’re creating and building, from scratch, a portfolio of assets they believe, or have been told, will do better than the alternatives. Sometimes this goes well, sometimes it doesn’t.
We work from a different starting point. Our investment philosophy is based on what we know rather than what we don’t. For example, we know financial markets do a good job of setting prices so we see no mileage in trying to second-guess them. We believe investors will, on average and over time, receive a fair return, given access to broadly diversified, low-cost portfolios of assets that aim to beat the market average. The portfolios achieve this by utilising past facts to provide information about a security’s characteristics and its expected future returns.
Decisions we make about which assets to hold are based on decades of academic research rather than on short-term hunches. This means we comfortably focus on meeting long-term goals rather than becoming absorbed or distracted by short-term market movements. As a rule, investment decisions are not easy to make, but if, like us, you build on solid current information, securely backed by decades of evidence, we believe you can improve your chances of successful investment.
Nothing demonstrates this quite as clearly or simply as Carl Richard’s diagram:
