Portfolio Construction
Our clients come first. Before beginning to make recommendations or invest on behalf of our clients we take care to ensure that we have a clear understanding of their investment objectives, tax status and risk tolerances. Only by doing this can we offer suitable advice or construct appropriate portfolios.
We recognise that each client is unique and do not seek to fit them into ready-made templates such as model portfolios or buy and sell lists.
Where appropriate we will recommend the use of services to mitigate the effects of taxation. We offer our own stocks and shares ISAs and can liaise with specialists to advise on strategies to reduce Capital Gains Tax and Inheritance Tax liabilities.
In some cases we will recommend the use of collective investments such as unit trusts, OEICs or, more often, investment trusts for some or all of the portfolio. We use collective funds in order to spread risk, to obtain exposure to overseas markets or to investments in which we do not have specialised knowledge. We do not operate our own collective funds but, rather, select the most appropriate Third Party funds to retain our independence as investment adviser. As a general rule we prefer to use investment trusts (closed-end collective funds) since these tend to have lower expense ratios and better performance than their open-ended alternatives.
Where compatible with client objectives we recommend investing in equities on a long term basis. The reason is that equities tend to offer better returns than alternative investment classes over periods of ten years or more. Although equity prices may be volatile on a day-to-day basis the effects of this are reduced over time if prices are on a rising trend. The effects of volatility are also reduced by holding a portfolio of equities with an appropriate spread of exposures to different sectors and/or countries. Seeking to build a portfolio for the long term should also reduce the need to incur the expense of frequent dealing.
Not all clients can accept the risk of being fully invested in equities and others may require higher levels of income than can be prudently achieved from a pure equity portfolio. In these cases we will advise setting aside a part of the portfolio for investment in fixed income stocks (bonds).
Where appropriate we may recommend diversifying portfolios into areas other than equities and bonds. Private Equity, Real Estate or Hedge Funds may be appropriate for some clients - usually via the use of a collective fund.
We have enough experience to know that today's investment fashion can often turn out to be tomorrow's disaster area. We would rather be thought conservative than reckless in our recommendations.