Where
we start
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We
believe that money should simply be a tool - a means to achieve the peace of mind
and quality of life you deserve. With this in mind, we apply investment management
techniques that have been shown, over time, to optimise returns while minimising
risk.The City would have us believe that investment advice is all about
making a forecast. They tell us they can look into a crystal ball and predict
the future. But speculating about the future is not a sensible decision. The future
is uncertain. As an adviser we can't promise accurate predictions of share prices
or manager performance, and trying to build your investment portfolio on promises
we can't keep would be foolish. The good news is that we don't have to
forecast to give you a successful investment experience. We don't have to pick
the best shares or identify which manager will outperform whom. Instead, we base
our investment strategy on the decades of Nobel Prize winning academic research
into the behaviour of share prices and investment strategies. The result is a
portfolio that aims for a solid long-term rate of return while minimising risk,
expenses and taxes. Our goal is not to beat the market, but to achieve a
healthy rate of return that allows our clients to achieve their financial dreams
without exposing them to unreasonable risk. By using investment management strategies
that have been extensively researched and refined to work in both good times and
bad, our clients can relax, knowing their portfolio has been specifically designed
to withstand the day-to-day and year-to-year fluctuations in the market.
Markets
work
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Markets
throughout the world have a history of rewarding long-term investors for the capital
they supply. Companies compete with one another for investment capital, and millions
of investors compete with one another to find the most attractive returns. This
competition tends to drive prices to fair value, making it difficult for investors
to achieve greater returns without bearing greater risk. Traditional investment
managers strive to beat the market by taking advantage of pricing 'mistakes' and
attempting to predict the future. Too often this proves costly and futile. Predictions
go awry and managers miss the strong returns that markets provide by holding the
wrong stocks at the wrong time. Meanwhile, capital economies thrive - not because
markets fail but because they succeed.
| Invest
or speculate?
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The
futility of speculation is good news for the investor. It means that prices for
public securities are generally fair and that persistent differences in average
portfolio returns are largely explained by differences in average risk. It is
certainly possible to outperform markets, but not in general without accepting
increased risk.
When you reject costly speculation and guesswork, investing
becomes a matter of identifying the risks that are likely to be rewarded in the
long term and choosing how much of these risks to take. Financial economists have
identified the risk factors that seem to drive investment returns. At Collingbourne
Wealth Management we construct our portfolios to capture them.
Take
risks worth taking
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Evidence
from practising investors and academics shows that risk and return are related.
Gain is rarely achieved without taking a chance, but not all risk-taking is rewarded.
Financial economics over the last fifty years has brought us a powerful understanding
of the risks that are generally rewarded and the risks that are not. The
overall consensus within the academic world is that expected returns in equity
markets can be summarised in three dimensions: - Market:
Shares have higher expected returns than bonds.
- Company
size: The shares of smaller companies have higher expected returns than the shares
of larger companies.
- Company price: Lower-priced
out-of-favour shares (or 'Value' stocks) have higher expected returns than higher-priced
popular shares (or 'Growth' stocks).
|
Academics
conclude that, taken together, the above three factors explain more than 90% of
the variation in average investment portfolios. To learn
more, visit our resources page for a range of
articles on investment theory. | 
