Investing is simple

Remember that the point of investing isn’t to aim for the highest possible returns. It’s to make sure you don’t die poor

William Bernstein

Once it’s understood that you can’t beat the market and control random events, you can start to focus on what you can control without the need to know what’s happening in the financial pages. Investment then becomes a discipline and a process that you can work through by taking a number of logical steps.

Investment return

Your investment return will either come from owning an asset or equity stake or lending your capital.

There are two fundamental ways of getting a return on capital:

  • Owning commercial enterprises or assets such as equities or property and receiving dividends or rent
  • Lending your capital to a government or company as a gilt or bond (fixed interest investment) and receiving interest.

It’s more to do with not losing, than winning

Once you understand more about investing, you begin to realise that it is more to do with not losing than winning. It’s about developing a process to improve your chances.

This you do by controlling:

  • Asset allocation
  • Costs
  • Taxes
  • Risk.

Adopting a passive approach

This means making your well researched choices and sticking with your decision. Letting us conduct annual reviews and rebalancing your portfolio where necessary.

We sell assets that have done well and buy assets that have performed poorly. Essential if we are to minimise your exposure to risk and ensure consistency over time.

This is without forecasting and recgonises that all asset classes move in cycles that do not necessarily coincide.

Our focus is on wealth management rather than stock picking or market timing

Wealth management is about giving advice that is appropriate to your whole financial and personal position.

It revolves around the things that you can control:

  • Saving, spending, taxes, costs
  • Financial planning with detailed cash flow modelling
  • Managing relationships with your other professional advisers
  • Asset allocation and risk management

And … discipline. Our job is to make you, the investor, a better investor and not to pretend that we can create better investments for you.

What’s really quite remarkable in the investment world is that people are playing a game which, in some sense, cannot be played.

There are so many people out there in the market; the idea that any single individual without extra information or extra market power can beat the market is extraordinarily unlikely. Yet the market is full of people who think they can do it and full of other people who believe them.

This is one of the great mysteries of finance: why do people believe they can do the impossible?

And why do others believe them?

Daniel Kahneman, Professor off Psychology and Public Affairs, Princeton University and 2002 Nobel Prize Winner