Investment Philosophy

Investing for your future

As you might expect, the stock market has a major role to play in meeting your long term financial objectives. To help us select the type of investments which hold the potential to meet your goals, we need to know as much as possible about your views on investment risk and reward.

The Benefits Of Diversification

All experienced investors understand the merits of a diversified portfolio — i.e. where the investment risk is spread across different asset classes and a range of holdings within each asset class. In our view, the most efficient way to construct a diversified portfolio of investments is to use collective funds such as unit trusts and OEICs and particularly those funds which adopt a ‘passive’ investment strategy.

Why We Prefer A Passive Investment Strategy

Passive funds are run by software programs. The program automatically buys and sells all or most of the shares in a particular market or index, such as the FTSE 100 for example. Therefore, the fund’s returns should mirror (more or less) how well the market or index is performing at any one time. And that's why we like passive funds — they have an excellent performance record.

The statistics show that few, if any, ‘actively’ managed funds consistently outperform any given index, benchmark or passive fund. Furthermore, passive funds are relatively inexpensive: the average annual Total Expense Ratio of a passive fund is 0.18%* a year, whereas the average annual Total Expense Ratio of an actively managed fund is 1.23%** a year.

Investment Management

For reasons of compliance, efficiency and expense, we outsource the construction and administration of client investment portfolios to Assetfirst. Assetfirst offers a range of risk-graded, low cost model portfolios, each of which utilises Exchange Traded Funds (ETFs) and Index Funds.

Central to the construction of each portfolio, is a belief that the right mix of assets — not individual stocks — is the key driver of returns, which is why each Assetfirst portfolio holds a different mix and weighting of assets. Asset classes available include domestic and international equities, bonds, cash and alternative asset classes such as commodities, real estate and hedge funds. Furthermore, investors can invest across a full range of assets without incurring high management costs. Assetfirst’s Balanced Portfolio for example, provides exposure to 15 sub asset classes but the fund’s annual Total Expense Ratio is just 0.18%.

* Source – Assetfirst portfolios – January 2015
** Source – Morningstar factset - IA Mixed investment 20%-60% shares sector – January 2015