Baxter Fensham are fee-only registered investment advisers. Consequently we do not need to create a successful financial plan→ (and The True Cost of Investing (.pdf)) to our clients to earn commission to pay for our time. This means we are able to focus objectively on which manner of investing is likely to give our clients the best outcome.
We favour a strategic approach rather than a tactical approach, for which we use low cost specialist funds. That is to say, broad asset allocation (cash, gilts, bonds, equities and property) with a buy and hold strategy as opposed to trying to constantly second guess the markets and incurring all of the costs of active fund management→ and the timing errors that are typical of such a tactical approach.
It is important to note, trying to beat and time (.pdf) the markets is speculation not investment.
Our investment philosophy→ is founded upon some 50 years of overwhelming empirical academic evidence, which demonstrates that on average and over time, such an investment approach gives the investor a greater net return.
In delivering our approach, we utilise where possible, institutional passive index investment funds. (They have very low running and acquisition costs. Thus your money needs to make much less to cover operating expenses than would be the case in actively managed funds. The lower the costs, the sooner your money is working for you. These funds also tend to be favoured by the big institutions and large pension schemes).
This method also enables us to simplify your planning and investments, leading to greater time and cost efficiencies.
There are a number of key benefits our clients enjoy through access to these institutional passive asset class investment vehicles:
- Lower operating expenses
- Less turnover resulting in even lower cost
- Consistently maintained asset class exposures
- Greater long term returns by avoiding active trading mistakes
- Lower volatility on their investment returns, particularly in such unsettled markets
- Regular rebalancing of the portfolio to maintain the correct risk profile and further reduce volatility
1: Attitude to Risk
2: Asset Allocation
3: Passive Funds
4: Rebalance
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Attitude to Risk
We undertake a comprehensive psychometric analysis of attitudes and tolerance to risk exposure, and your ability to stay invested during periods of decline in the value of your portfolio.
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Asset Allocation
Academic research shows that on average and over time, asset class composition is the dominant factor in determining a diversified portfolio’s long term returns.
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Passive Funds
We believe that because markets are now so efficient, the traditional ’share picking model’ no longer works predictably over the long term. Passively managed institutional asset class vehicles offer superior potential for achieving long term returns.
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Rebalancing
Because asset classes grow at different rates of return, it is necessary to periodically rebalance a portfolio to maintain a target asset mix. By rebalancing regularly you are enforcing a discipline often on a ‘buy low, sell high’ basis, which enhances the long term return for the portfolio.
