Pillar 1:  Fees matter over a lifetime of investing.

• Action: Fees reduce returns to the investor. We aim to minimise fees through the reduction of trading costs and funds management charges.

 

Pillar 2: Asset class selection is responsible for 94% of investment performance.

• Action: We promote asset class investing (passive, engineered, and academically supported) Own the market as opposed to using ‘Active Fund Managers’ who attempt to time and select.

 

Pillar 3: A buy and hold investment strategy is superior to chasing the latest ‘best’ performing securities or fund managers.

• Action: We re-balance to match client’s capacity and willingness to accept risk to achieve their required rate of return, providing them the best possible chance to achieve their stated goals.

 

Pillar 4: Equities (shares) & property outperform bonds and cash over the long term – historically.

• Action: To the extent necessary, to achieve a clients required rate of return, their investments will contain broad-based equity portfolios as the most reliable (if not the only) means to fight off inflations long-term erosion of purchasing power over a twenty to thirty year retirement. At 3% inflation costs escalate 2.5 times over 30 yrs.

 

Pillar 5: Risk and Return are correlated

• Action: Low risk high return does not exist – but many people mistake volatility as risk. Volatility is simply the usual fluctuations, some large some small, which occur with economic and financial change. There have been 13 major fluctuations since the Second World War during which time the S & P 500 index has grown from 180 to 1800 without the addition of dividends.

 

Pillar 6: Owning smaller companies, relatively inexpensive companies and relatively more profitable companies provides superior returns.

• Action: It is important that portfolios contain a greater weighting towards smaller companies, relatively inexpensive companies and relatively more profitable companies than their market weight, as in the long term this provides superior returns than just owning all the shares in a market.

 

Pillar 7  With 10 years or more life ahead of you, fear of market volatility is not rational.

• Action: Since 1926 the average time from a major market top through the subsequent bottom and back to full recovery (with dividends reinvested, and adjusted for inflation) is just over 3 years. Therefore, if you begin retirement with two to three years living expenses in a money market fund, you have covered the greater part of historical out comes – assuming your long term investment is with a broad – based equity portfolio.

 

‘Risk is not having the money you need when you need it. It is not your investments temporarily dropping in value during a time in which you never intended to spend them anyway’