How do I select the right investment?
Chris Broome – Chartered Financial Planner
Is an understandable and quite common question to ask yourself.
Whether it is your workplace pension, or the excess cash you’ve built up, or the inheritance you’re about to receive, or indeed your pre-existing self-investment account on Hargreaves Lansdown.
A quick glance at Longhurst’s internal investment software (powered by Morningstar) lists, in just one database, more than 65,000 investment options, across a myriad of share classes.
So, it is of no surprise that one could be a little overwhelmed when making their own investment choices, and it is for this reason that we encourage individuals to seek out the advice from an experienced team of financial planning and investment management professionals.
Another common question we get asked is ‘What is the best performing investment?’ Our reply is normally something like this ‘The marketing department of fund management companies’………
This is because there is no one golden bullet or super investment opportunity. Markets and investments go through cycles and most returns are driven by momentum of prices.
So how can we at Longhurst help?
Have an Investment Policy
“The investment policy you apply to your investment will have a big influence on the return in the portfolio.” (Ibbotson, 2010)
“Quantitative tools and modelling techniques can take the emotion and cognitive biases out of portfolio decision making process.” (Defusco et al, 2007)
Numerous studies have shown that the allocation of wealth across the 4 main asset classes (cash, property, bonds, and equities) will be a key driver in the risk and return of your investment.
Combine this with tax, charges, investment style, and market timing, and the overall approach will be responsible for between 40% to 90% in the return variation. (Al, 2010) (R G Ibbotson, 2000)
This approach then needs to be documented in an Investment Policy, which outlines the investment style and approach you are taking, and provides a focal point and reminder during the more volatile times the portfolio will temporarily experience (think March 2020).
Do you have an Investment Policy of your own? And if you do, are you sticking to it?
At Longhurst we take of all of this for you. We apply a tried and tested quantitative approach which ensures we can add value to our client’s investment portfolio, whilst also delivering trusted stewardship to their wealth. All documented and evidenced, saved to your MyLonghurst App, available should you ever wish to revisit it.
Be the Rationale Investor
Not all investors are the same – shock horror!
We all interpret and then approach risk differently.
Money is a scarce resource and one which can take a long time to generate. This means it must be invested efficiently.
The best way to do this is the be the ‘rationale investor’ – one that does not take more risk than is required.
Today, through a combination of powerful modern computing and a strong understanding of mathematics and statistics, we at Longhurst are able to optimise our client’s investment portfolios and select suitable securities to maximise their return for the lowest level of risk available.
This approach then ensures our clients are ‘rationale investors’ and their wealth is invested efficiently.
Experience Counts
“An investment axiom states that to be successful, portfolio managers need to have experienced both good and bad markets.” (Haslem, 2003)
Clearly, unless you are qualified in investment management it can be difficult to know what criteria, or mathematics, you should be using to select a fund, fund manager, or investment approach.
Relying on the Top 10 Hot Picks from your favourite newspaper is, we are afraid to tell you, a fool’s errand and something that is setting you up to fail over the long-term.
Longhurst understands this problem and so we ensure that our in-house Investment Committee have a solid understanding of economics, algebra, calculus, financial theory, and statistics. Experience developed during live and real time markets, and over multiple decades.
We’ve put in the hard yards, the studying, examinations, and real-life experiences, so you don’t have to.
A Direct Personal Relationship
Have you ever tried to have a virtual meeting or phone call with a fund manager?
The answer for most is probably ‘No’ and if you did the conversation would most likely be one of them making a lot of noise, talking a lot, and using far too many complex and technical terms.
For example, do you know what the term ‘covariance’ is?
It is the mathematical proof to not put all your eggs in one basket.
But that’s not really the point.
The point is that here at Longhurst we use simple and clear English to explain to you, our client, what is actually happening in your investment portfolio. That is, if you want us to explain that to you.
Our relationship is with you. The portfolio construction, tax planning, and communication is personally tailored to your needs, instead of being bundled in with 1,000+ other investors (like a collective fund or multi asset fund).
Our team is also available to talk to you directly from director and chartered financial planner to technical analyst.
We have the expertise to change your strategy to the changing needs of your life, whether you want to invest for income or growth, or to adopt a market cap weighted model, or to select alternative investments, use new tax planning approaches, or balance currency risk as you are about to spend more time abroad.
And we do it with a smile, good humour (when required), and a supporting hand on the tiller during the occasional rougher moments at sea.
Get in touch
Let’s be honest; employing a new professional adviser can be fairly daunting, and that includes hiring a new financial planner or wealth manager.
For this reason we are big fans of hosting what we call an initial Exploration Meeting, always held at our expense.
This meeting will typically involve no paperwork whatsoever, and will instead see us spend a good hour+ just talking, and we mean just talking.
By the end of your Exploration Meeting you’ll understand a little more about us, and we about you. You’ll understand how we work, our processes, the likely fees, and why households choose to engage in our services.
No selling, no products, no commitment. Then, if we’re both in agreement, we can move ahead with a trusted professional relationship.
If you would like to take the next steps, please contact us here.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
