2021 Investment Strategy Checklist

In order for a successful investment strategy to be implemented, there are certain fundamental conditions that need to exist and factors that need to be considered.

Capitalism (Free Market Economics) Works

Companies borrow money from investors, shareholders.  They also borrow money from banks and others to gear up or leverage shareholder’s funds.  The purpose of The Firm is to make a return on this capital that is greater than its cost.  Companies make profits (create wealth) and pay dividends to shareholders. The expectation of the increase in profits and dividends over time encourages others to buy the stock, which demand drives the price of the shares upwards.  Of course not all companies prosper, some fail, but overall businesses do thrive and grow.  Capitalism is not a zero sum game.  When these successful businesses prosper so do their shareholders.

Cost Control Is Essential

The costs of running a portfolio will have a dramatic effect on returns.  Consider an average actively managed mixed fund that may achieve a 6.0% annual return.  The annual management charge may be 1.0% and the total expense ratio 1.5%.   1.5% from 6.0% leaves 4.5% return to you.  A reduction in return of 25%.  Part of our job is therefore to seek out fund managers whose charges are as low as possible, as long as the fund itself, from an investment tool perspective, is worth buying.

Asset Allocation Is Key

Asset allocation is the balance between and within the four main investment asset classes of cash, bonds, real estate and shares.  And, for example, within shares the asset allocation is the balance between differing segments, for example large cap and small cap, and ‘value’ and ‘growth’ stocks.  Managing the relative proportions of these within a portfolio which takes account of your attitude to risk, capacity for loss and time horizon is the most certain way of achieving a successful investment experience.

Diversification Reduces Risk

Holding just one stock or even just one fund exposes you to market and specific risk.  But just buying another fund or share would not necessarily diversify your portfolio.  For example, holding Shell and BP would not be diversifying.  With funds it is necessary to ensure that the underlying holdings are not correlated otherwise one would just have more funds, not more diversification.  So, any risk factor that can be reduced or cancelled out by diversification, should be.

This also applies to geographic location.  Why concentrate your portfolio in the UK market when that market represents only about 7% of global equity market capitalisations?  Diversification globally reduces risk, and should increase returns.


Man is an emotional being.  We demonstrate all sorts of irrational behaviours, especially where money and wealth are concerned.  We have a propensity to follow the herd.  Often we will buy investments just because they have risen in price.  And sell them because they have fallen.  That is, we are buying high and selling low.  Just the opposite tactic to the one needed for investment success.  We need to be dispassionate and we achieve that by having a defined investment process.

Efficient Administration

This should really speak for itself.  Over the last twenty years or so there have been two developments – one driving the other – that have made efficient administration much easier.  One, technology, and two, platform services (professional online specialist administration systems) that electronically integrate with our client management system.

Clear communication

Connecting with and informing our clients in a clear and understandable way, both with our literature and with regular reviews.

Regular Reviews

These reviews are at both the portfolio strategy level and the client level.  We regularly test our portfolios.  And we insist on at least one annual review with you.

Over time we have tested and perfected this model, and the continued evidence we have seen has proven it to be the most effective form of investing and caring for our clients.