Methods of Investing

Investment can be very complicated depending upon the level of involvement you wish for. Our aim is to try to take the burden away by working behind the scenes on your behalf.

 Step 1 -Asset Allocation

Arguably, asset allocation is the most important step in the process of long term investment planning and needs to reflect the risk profile you have. We have turned to Moodys who are acknowledged experts in this field to provide this allocation and you do not need to provide one.

 Step 2 - Strategic or Tactical Allocation

The asset allocation provided by Moodys is largely strategic in nature i.e. each risk profile has a set allocation which we maintain by re-balancing the portfolio periodically. This does not suit every investor who may have their own preference/dislike for a particular asset class or geographical area and would wish to bias the investments towards/away from it. This is tactical asset allocation, like the Brexit portfolios we currently run that move the bias away from UK assets, and obviously needs to be reviewed regularly.

 Step 3 – Passive or Active Management

Active investing is the process whereby fund managers are trying to use their knowledge and trading skills to outperform the particular benchmark associated to their fund. They would argue they can produce better results in times of volatility.

 Passive investing is very different in that the funds held replicate the benchmarks and do not attempt to outperform or have any input from fund managers. The benefit of this approach is that the cost is less than active investing.

 There are arguments for and against both types of investing and depends upon your personal choice – a combination of both can be used.

 Step 4 - Fund selection

The main problems with fund selection are: 

  • The huge number of funds and fund managers to monitor.
  • The constant movement of fund managers from one investment house to another.
  • The increasing number of smaller boutique investment management companies, some of which have been poorly funded.

 To ensure we are recommending the best funds we pay for an entirely independent company to provide this type of research – Rayner Spencer Mills. RSM give definitive ratings on funds based on quantative and qualitative data – they have a binary approach in that a fund is either worthy of their rating or not.

 RSM undertakes their research on an on-going basis and formally every 3 months and recommends changes to funds if appropriate.

Sustainable and Responsible Investing (SRI)

Climate change, world population growth and an ageing society are putting severe pressure on the resources of the planet which will only become worse in future. We believe that investing in the following types of companies not only will help us in future but will also be in areas that will see growth. They are involved in:

  • producing clean energy
  • preserving and generating new water sources
  • more efficient agriculture and timber production
  • producing drugs for the elderly
  • producing electric and hydrogen powered vehicles - along with the associated technology
  • building eco-friendly houses and carbon neutral offices

Just as for the standard risk profile portfolios we currently have both Strategic and Tactical (Brexit) SRI versions. There is an old saying that some people know the cost of everything and the value of nothing. Whilst cost is an important factor in investments we believe that the value of supporting these companies by buying their shares is more important than holding a less costly index; therefore we do not offer passive versions.