There are two fundamental approaches to investing which can be broadly divided into Passive and Active fund management, both have been subject to a large amount of academic scrutiny as detailed below.

BPH Wealth Management have studied this academic research, some of the sources of which are detailed below, and have concluded, along with a growing number of large institutional investors, that Passive Fund Management offers the best opportunity to deliver market returns cost effectively.

Several studies, as detailed below, have concluded that the combination of asset classes in a portfolio is the single most important factor in determining the investment performance of that portfolio.

Having studied the evidence, BPH Wealth Management subscribe to the view that:

• There is no evidence that fund managers possess stock selection skill
• There is no evidence that market professionals can time markets
• There is no evidence that past performance of a particular manager is a guide to future performance
• The market return is good enough and easily accessed

Many research papers including Burton Malkiel’s “Random Walk Down Wall Street” 1973, 1984 and 1991,Michael Jensens "The Performance of Mutual Funds in the Period 1945-1965" Journal of Finance 1965 have concluded that 66% of Mutual and Pension fund managers under perform the Market Average.  Furthermore John Bogle in his paper “Selecting Equity Mutual Funds” 1991, concluded that top performers for the past year do not outperform in the following year and top performers for the past ten years do not outperform for the following ten years.

BPH Wealth Management distinguishes its approach to investment by applying asset allocation strategies principally in a passive way to embrace these philosophies and by applying these philosophies BPH Wealth Management believe we can deliver a reasonable return at a reasonable cost with reasonable risk.  You are reminded however that the value of investments can go down as well as up and you may not get back the full amount invested.

We recognise that no two investors are alike, there is therefore no single strategy; each investor has his or her own risk tolerances, goals and circumstances that dictate the weightings in each asset class.  BPH Wealth Management will help you determine an appropriate mix of assets. Most good advisers do this but BPH Wealth Maangement distinguishes itself by recognising that there are different asset classes within Equities that can be combined to reduce volatility and improve returns and equally as important ensure that these assets are held in the most tax efficient wrappers thus minimising Income Tax, Capital Gains Tax and Inheritance Tax.  There are very few advisers that combine the investment discipline of multi asset investing with tax efficient wrappers.

“The best way to hold common stocks is through an Index funds - Warren Buffet chairman of Berkshire Hathaway” 1996.

Index funds allow you to gain exposure to different asset classes at much lower cost than actively managed funds. In addition, such funds avoid the additional risk of market timing or style drift which is inherent in funds which are actively managed. Study after study* shows that when active funds do outperform benchmark indices, this is down to luck rather than skill and no more than would be expected by random chance. It just doesn’t make sense to pay so much more for random chance.

*Studies Include - Eugene Farmer "Efficient Market Hypothesis" 1965;  Mick Carhart "Survivor basis and persistance of mutual fund Performance " 1995; Quigley, Sinquefield "Performace of UK Equity Unit Trusts" 2000; John Bogle "Selecting Equity Mutual Funds" 1991; FSA Occasional Paper by Mark Rhodes "Past Performance of UK Equity Managed Funds" 2000.