It’s not often we think of boring as a good thing. If I told you my day was boring, or the movie I watched last night was boring, it would put you off it. To be fair, it would probably put you off me because I’ve just come across as a very boring person. So why are we proud to run a boring investment?
A boring investment is right up there with a boring flight. You don’t want to get off a plane having survived turbulence, an attempted hi-jacking and a near death landing. Investments are exactly the same. We want our clients knowing the money they have is as safe as it can be. Yes, we accept investments can go down, but we don’t want them dropping 50% overnight. Our aim is that our clients can sleep at night. We don’t want your money to crash and burn.
This is why I write about long term investing in a well diversified portfolio. But what does this mean?
Long Term Investment
I don’t want a client looking to double their investment in a week. It would be great if I could do that, and I’d probably have a queue of clients waiting to speak to me, but it’s not realistic. Our clients invest money that they don’t think they need for a minimum of 5 years. If they need it sooner, they can get it. But if you told me you need this money next year, I wouldn’t let you take any risk of it losing value.
As the famous Warren Buffett said, “If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.”
Diversified Investment
This simply means that you are invested in lots of things. It can be different shares, bonds, property funds… It could be gold, fine wine or according to a seminar I was at, FA Cup Winners’ Medals. These different assets should also be from all over the world to be truly diversified. Maybe they are from different sectors? By this I mean both in very large companies, and very small companies. It’s the old adage of not putting all of your eggs in one basket.
We don’t aim to only buy the companies that we think will do well. Why not? Because what I think will do well, might be different from what you think will do well. So we buy the entire market. Then we have all the companies that did very well, and those that did not so well, and all the ones in between. If we leave this for many years, evidence shows that we should beat inflation.
John Bogle was the founder and CEO of an investment company called Vanguard. He explained it well when he said; “Don’t look for the needle in the haystack. Just buy the haystack!”
So yes, I am proud of our boring investment. Our clients are generally happy with what their money has done so far, but most of all, they don’t need to worry. Most of us don’t worry about the money in the bank, but if it stays there for any length of time, you lose money. Not in monetary terms, but in purchasing power – the long term effects of inflation. So why not see if you can afford a boring investment? Then we can all go in search of some excitement where it won’t cost us money.