Has PWS’s investment philosophy changed at all recently?

Category: Investment

Our Investment Committee recently convened.

Its responsibility is to oversee the investments we recommend. In other words, governance.

An essential part of this is to review our investment philosophy which we covered in an earlier post. Our investment philosophy has developed somewhat since then but the central pillars remain the same.

What is your investment philosophy?

This document covers what we believe in detail but in short, we believe:

  1. The most important thing is to invest in a diversified portfolio of investments and hold it for as long as possible. Everything else is secondary.
  2. This portfolio should hold as much in global equities as is right for someone’s circumstances and psychology.
  3. Holding a portfolio for the long term has much more to do with behavior than anything else. We believe financial planning and advice can help massively here.
  4. Asset Allocation (how much to invest into UK Equities, US Equities, Global Bonds etc) is a major driver of returns within diversified portfolios. When allocating assets, getting as much potential return as possible for the level of risk being taken is worthwhile, but we should not reduce the diversification of a portfolio while trying to do so.
  5. A strategic approach, reducing speculation, is key. Nobody can predict the future consistently.
  6. The level of exposure a portfolio has to different structural risk factors is important. Risk factors include how big a company is or whether investors undervalue it.  These have a large part to play in explaining the reasons why diversified portfolios perform differently.
  7. As asset allocation, risk factors, and investor behaviour drive returns, there is little scope for active management to deliver value. We would only consider an actively managed fund if we have confidence in it to deliver an asset class, or risk factor, we could not access any other way.
  8. Ongoing maintenance, including rebalancing the portfolio back to its original mix, is important to manage risk.
  9. Finally, we would only deviate from the above to increase the chances of holding a portfolio for the long term. An example of this would be for those who want to invest ethically. An example of where we would not deviate is how we do not believe in income investing for those relying on their portfolios to fund their spending.

Do you need some help with deciding how best to invest? Feel free to book in a free no-obligation chat here.

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