Investment Journey

If one was going on a car journey one might expect the average speed to be say 40 MPH but would accept that at some times one would be stationary at the lights, sometimes doing 20MPH and sometimes doing 60 MPH. It follows that irrespective of the risk attitude of the driver one would not expect to travel at the same speed the entire time. A cautious driver would not travel at 20 MPH down a motorway (unless it was the M25!) and similarly an adventurous driver would not drive at 90 MPH through a city centre. I therefore find it absurd that people try to do just that with their investments and expect returns to be uniform at all times.

We know that on a car journey however well you drive you can still have an accident and since investment matters are far more complex accidents are inevitable. However, by adjusting one’s investments according to market conditions those accidents should be less severe and the overall average return substantially improved. We know for example that when the economy is strong both property and shares will perform well, as long as they have been purchased at sensible levels. Similarly both perform poorly in a deep recession. When the economy is weak Cash and Fixed interest are favoured and the direction of interest rates, inflation and the severity of the recession would dictate exactly where one would invest.

Using the above driving analogy we are currently in the city centre, with black ice and 12 inches of snow. However, adventurous one would otherwise be, common sense would dictate that everyone would be very careful. It follows that in time the snow will melt and the summer will come and people will progress on to the open road. The more adventurous will drive faster (holding mainly shares and property) it does not follow that just because one is fairly cautious that one would remain in cash and bonds …this would be the equivalent of driving 20 MPH down the motorway. The cautious investor would include some shares and property but to a lesser extent than the adventurous individual.

In essence Premier aims to help clients better understand their investments and to be involved in them on an ongoing basis. Premier includes monthly investment bulletins and regular meetings. Adjustments to holdings are made according to the risk of the individual, investment timescale and the broader economy. Approximately 93% of investment return comes from asset selection (ie determining whether to hold Cash, Fixed Interest, Property or Shares) and Premier focuses principally on this key area. It is an exclusive wealth management service aimed at individuals with Pensions and Investments in excess of £200,000.