Investment Philosophy

Widely regarded as the world’s most successful investor, Warren Buffett is as famous for his wit as he is for the investment skills. On investing when the market is falling: Buffett says, “Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.  Be fearful when others are greedy and be greedy when others are fearful.”Buffett is a long term investor. As he says “Our favourite holding period is forever”.

Protection against Inflation

Inflation erodes your purchasing power and diminishes your returns.If you require your portfolio to deliver strong real returns to maintain a reasonable standard of living throughout retirement, your first priority is to protect your capital from the impact of inflation.Accept short term volatility for long term growth.

Growth verse Income

Lack of growth will badly affect long term income.A good balance between a high yield and a reasonable rate of growth gives you the best chance to maintain a solid income into retirement.A high yield can often be indicative of a low quality investment.Yield is often pegged to growth and if there is no growth then the yield will start to fall off after taking inflation into account.

Time V Timing

Many investors try to “time” their investments to capture the best returns. However, experience shows that the key to successful investing is time in the market, not timing.Time is on Your Side.The Benefits of Dollar Cost Averaging Regular Savings

Educate yourself in the ways of sensible investing.

If an asset pays income, it’s an investment; if it doesn’t it’s a speculation.At least half of all investment return comes from the income. Longer term it’s more than half.When investing, you can’t have too much patience nor too much discipline.

Invest because opportunity exists, not because cash is available. Sometimes the best investment strategy is to do nothing. Don’t rely on the opinion of others; do your own research.Buy good long term assets and hold onto them – don’t trade.The only people that benefit from trading strategies are Stockbrokers and Real Estate Agents.

Yield only is detrimental to your portfolio you must also have growth. In simple terms, if you chase a high yield, the yield is about all you should expect.The most important part of the investment process is to automate the investment process and buy quality.Short term or speculative investment decisions are about as reliable and useless as trying to forecast the weather in the very short term.

We need to stop agonising over the short term decisions, with questions like:

  • Is this the right time?
  • Will the market fall in the near future?
  • What if interest rates rise?

We need to ignore the short term static.We should take the same view with discretionary savings and simply substitute years for months.

Have confidence that the prices you pay for assets today will be double and triple by the time you reach retirement. Think about the family home when you paid $500K and now it is $1,100K and you thought then that it was a lot, so inflation alone will do the job.

If we give ourselves enough time our investment decisions simply come down to picking a quality asset and taking action. Remember time is your most valuable asset and just let inflation do its job.

Investors can be paralysed by short term price decisions they find impossible to make. Let inflation do the work therefore time is your best asset.

We do not believe market cycles can be timed successfully time after time. In the long term there is a big correlation between earning growth and capital growth, earnings creates the growth.

Concentrated managers will usually outperform active managers.Value will always beat growth.Dividends account for 70% of returns on equity markets in the long term.

ADVICE BETWEEN THE FLAGS