investment methodology.
most traditionally managed portfolios have failed to match or exceed market returns.
of the relatively few 'winners', most fail to beat the market over subsequent three and five year periods.
yet most investors are unaware that their chosen approach to managing their money is destined to fail. conventional 'active' strategies (stock picking and market timing, for example) are characterised by an on-going series of speculative decisions. forecasts are made in a perpetual environment of randomly fluctuating stock prices and constantly changing interest rates, economic and political developments, and man-made and natural disasters.
at trusted advisor, we know that it’s not necessary to accurately predict the future to have a successful long-term investment experience. wealth is neither created nor preserved by merely moving money from stock to stock, from sector to sector, or from one money manager to another.
a consistently effective way to capture your fair share of wealth creation is to deploy your capital throughout the public equity and debt markets in a broadly diversified manner. this is likely to result in a global capital markets rate of return (net of costs) that exceeds the return realised by the vast majority of traditional investment advisors and individual investors over time, and often with less risk.
our underlying philosophy is based on one of the seminal ideas in investment management and financial economics: the 'three-factor model' developed by eugene fama SR. and ken french. when these prominent academics analysed the connection between risk and return in the equity markets, they discovered that approximately 95% of a portfolio’s return can be explained by three factors:
asset class solutions.
at trusted advisor, we use these insights to develop a portfolio for you that is diversified globally across as many as 14,500 different securities using institutional-grade 'asset class' funds.
thanks to the unique risk and return behaviour of each of the three factors, our broadly diversified portfolios offer expected returns that exceed the market (FTSE all share) return but with similar risk. this is due to the fact that the movements of the asset classes are not perfectly correlated. therefore, investors in well-constructed and broadly diversified asset class portfolios can realise the weighted average of the asset class returns with less than the weighted average of their risk. in contrast, portfolio concentration, following forecasts, frequent changes of managers, or reliance on other speculative strategies are generally much more costly and risky alternatives to asset class investing.
our goal is to significantly reduce, if not eliminate, the uncompensated risks of 'active' management and help you implement a fully transparent, manageable, and timeless investment process.
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portfolio advisory.
market – stocks have higher expected returns than fixed income
size – small company stocks have higher expected returns than large company stocks
price – lower priced ‘value’ stocks have higher expected returns than higher priced 'growth' stocks
