Cooking up your investment philosophy

Julie’s mum was never a great cook. Last time Julie visited, she’d burnt the boeuf bourguignon. The meat had dissolved, the mushrooms had disappeared and all the juice had boiled away, leaving nothing but sweet little onions and chewy bacon bits. Of course, Julie ate it anyway.

Putting together an investment philosophy is a bit like creating the perfect recipe. You have to start with good ingredients, mix them well, add spice and seasoning to taste – and remember to keep an eye on the dish while it’s cooking.

Here’s how the analogy relates to our clients.

First, we source a wide range of ingredients from around the world. We call this ‘global diversification’.

Then, we mix a large number of small and value stocks together, sprinkled with a few fixed-income investments. The precise proportions we use will depend on your taste.

By ‘taste’, we mean risk level. That’s why we spend a lot of time determining your approach to risk before we start cooking.

If you are a cautious investor, we blend in more predictable investments that might mean lower returns. If you are a more adventurous investor, we use a greater proportion of small and value stocks that may be less predictable but can offer higher returns.

In the same way we know too much salt is bad for you, we keep your fees to a minimum.

We sniff, taste and stir the mixture regularly, to ensure it doesn’t stick and burn. In finance terms, that means we test and rebalance the blend of ingredients in your investment portfolio every year to ensure they remain aligned to your attitude to risk.

In reality, our investment philosophy is not miles away from following a recipe. Rather than a cookbook, we use a scientific approach, the latest software and online monitoring systems, to make sure the results will be to your taste.

If you would like to find out more about investment philosophy, please contact us by clicking here.

Lance Baron

Certified Financial Planner (CFP) based in East Sussex, UK. We support people in Southeast England with more than £500K to invest by building a financial plan that will help them live the life they want… until age 100