Financial planning is the key to unlocking your lifestyle aspirations and ambitions for
The investment philosophy summary
Manage risk tightly
Manage costs effectively
Focus on portfolio structure
Capitalism works
Our philosophy
Diversify broadly
Markets work
Risk and return are linked
What’s your current position, what are you trying to achieve, and what longterm goals are you passionate
about?
Financial planning is the key to unlocking your lifestyle aspirations and ambitions for the future. At Old Mill we know that to put together a plan which enables you to realise those aims, we need to understand what makes you tick –what’s your current position, what are you trying to achieve, and what longterm goals are you passionate about?
Investment advice is likely to play an important part in that plan, but other issues – such as making sure you maximise the opportunities for tax efficiency – will be crucial too. And any investment plan will need to reflect your own attitude towards risk and reward.
We define a successful investment experience as one where our clients sleep soundly at night, understand the investment journey they are taking, and have a strong chance of achieving their future lifestyle goals. If that’s a journey you are interested in making, we hope the following information will help.
Do you need to invest?
It’s easy to recognise that to achieve your long-term lifestyle ambitions, you’ll need to set aside money for the future. But it’s far harder to decide how much risk you are comfortable taking to generate the returns you want.
The alternative to investing is to simply leave money in a deposit account, but this will mean that spending power diminishes. The effect of inflation on the goods and services that we all use on a daily basis means that the growth on deposit accounts (especially after tax) is not usually sufficient to increase or even maintain wealth.
So while it’s important to set some money aside that is easily accessible, you will need to take other steps to generate larger long-term returns.
Once we have a clear understanding of what you’re trying to achieve, we can help you to meet those aims and ambitions using a logical, low-cost approach to investing.
Founded on strong economic and investment theories, and guided by the wealth of academic and empirical evidence available, this approach offers a number of clear pointers to where we should focus our energies on your behalf, and provides the best chance of securing a successful investment experience for you.
Our investment philosophy
Our core beliefs
Our philosophy comprises three core beliefs and three important practical principles.
Capitalism and markets work effectively:
We believe that capitalism works. Capitalism is reasonably effective at allocating capital to companies, via the markets. Those who take on the risk of enterprise expect adequate return for these risks.
We also believe that markets work well. The market mechanism for pricing financial assets does so in a broadly efficient and fair manner, based on supply and demand, as in any market. We expect that the price of a company’s shares should closely reflect the information known about it. Capturing the return of the market becomes the key goal.
Risk and reward go hand in hand:
There are few free lunches in investing. If you need a higher rate of return to achieve your financial goals, you will need to take a higher level of risk in your portfolio. Risk can be viewed in a number of different ways; the volatility of returns (also described as the bumpiness of the investment journey), and the chances of loss, are two commonly used descriptions for risk.
Diversification is a useful tool:
Not putting all of your eggs in one basket is an intuitive and valuable concept. Different types of investments such as equities, property and bonds can help to make the investment journey smoother, without necessarily giving up return. We use diversification broadly in client portfolios, spreading risks across individual securities (equities and bonds), geography, and by investment type.
Our practical principles
Focus on the portfolio structure:
Your long-term portfolio structure will dominate your investment journey, so building the right portfolio structure for you is the central focus of our process. Successful investing is about taking on ‘good’ risks that deliver a positive contribution, while avoiding the ‘bad’ risks such as illiquidity, manager risks associated with trying to beat the markets, and opaque and complex product structures. But your portfolio must be suitable for you and your circumstances, so one of our key aims is to ensure that the structure of your portfolio reflects your own individual attitude to investment risk.
Manage costs effectively:
Costs are an important consideration in investment management, as small differences in returns due to costs can have a major impact over the longer term, significantly affecting your future lifestyle choices. Costs come in two forms – financial and emotional – and effectively managing and reducing them can be achieved without taking any risk.
From a financial perspective, the evidence indicates that investment industry costs are high, particularly those related to active management (for example, where managers attempt to outsmart the market). Minimising product and transactional costs (buying and selling) is a keen focus of our approach.
From an emotional perspective, behavioural finance literature tells us that most investors have a number of psychological biases which drive them to make poor decisions. These include ‘buying high’ at the top of the market and ‘selling low’ at the bottom of the market – actions that can swiftly and needlessly destroy wealth. Our disciplined approach to the management of client portfolios, along with ongoing expectation management and education, helps to reduce the emotional costs of poor or badly timed decisions.
Manage risk tightly:
Rebalancing – having created the right long-term portfolio structure for you, it’s important that your portfolio is not allowed to stray too far from this mix, so we rebalance it back to its original combination of risks on a regular basis.
Product due diligence – before we recommend any ‘best in class’ product to you, we undertake a full, methodical due diligence review, and continue to closely monitor products on an ongoing basis.
Ongoing governance – our formal Investment Committee meets regularly to review the broad range of risks and investment issues that could impact on client portfolios, and to reaffirm or refine our robust investment processes.
We hope this has given you an introduction into our investment principles.
If you’d like to find out more please contact or speak to your adviser at Old Mill.
Contact
Exeter
Leeward House | Fitzroy Road | Exeter Business Park | EX1 3LJ
+44 (0)1392 214635
Chippenham
Unit 2 | Greenways Business Park | Bellinger Close | SN15 1BN +44 (0)1225 701210
Wells
Bishopbrook House | Cathedral Avenue | BA5 1FD
+44 (0)1749 343366
Yeovil
Maltravers House | Petters Way | BA20 1SH
+44 (0)1935 426181
Please take a moment to read this important information
The content of this document is for general information only. It should not be relied upon without taking appropriate professional advice. Please contact your usual Old Mill adviser or a local Old Mill office.
This service is provided by Old Mill Financial Planning Limited who are authorised and regulated by the Financial Conduct Authority.
Registered office is Maltravers House, Petters Way, Yeovil, Somerset, BA20 1SH.
enquiries@om.uk | om.uk