Voices of experience

    26 November 2016

    The investment philosophy of Spectator Money can be summarised in a few simple guidelines. First, take an active interest in the totality of your asset portfolio, rather than leaving it to look after itself or entrusting most of it to the sort of manager who charges too much for no better than mediocre service. Take a long-term view that matches your expectations and commitments, and be prepared, like the great economist John Maynard Keynes, to change your opinion when the facts change. Diversify across markets and asset classes, and between financial and real assets — not only to achieve better risk management, but to make your life more interesting.

    And related to that, have a bit of fun with the top slice of your money. On the cover of this issue we make that point by featuring a classic car: as Henry Jeffreys says on page 30, the thrill of owning and driving such a beautiful machine is at least as important as the fact that, if well chosen and well cared for, it will also rise in value.

    The emphasis on choosing well highlights another pillar of the Spectator Money creed: investment should always be informed by a combination of broad general knowledge and expert advice. In that respect, we have a clear prejudice in favour of advisers who have experienced successive cycles of boom and bust over the outpourings of the younger analysts and pundits who were once dismissed by Nigel Lawson, when he was Chancellor of the Exchequer, as ‘teenage scribblers’.

    In this issue, it is our pleasure to welcome three guests who count as seasoned market warriors. The respected economist and author John Kay sets out the rationale for embarking on a Self-Invested Personal Pension for retirement, and offers straightforward advice on how to achieve optimum performance for your Sipp. Terry Smith, a fund manager of 40 years’ standing in City life, talks to Jonathan Davis about his penchant for solid consumer-staple equities; and Stanislas Yassukovich, a pioneer of the London eurobond market half a century ago, explains why he believes the Square Mile will rebound to exploit the opportunities offered by Brexit.

    But mention of the Brexit vote, now followed in the United States by the surprise election of Donald Trump, reminds us that even the wisest of commentators have mostly been wrong in their short-term predictions this year — as have the markets themselves. The pound rose against the dollar on the eve of the referendum on UK membership of the EU in the clear expectation of a Remain victory; sterling then slumped after the result, boosting the attractiveness of FTSE blue-chip stocks to international investors. So the stock market remained buoyant, and even sectors initially hit by post-Brexit fears soon rallied. Matthew Lynn, Spectator Money’s ‘sector watch’ specialist, pointed out the positives for UK housebuilders in our last issue, and on page 8 this month he turns his attention to the growing strengths of our digital sector.

    But the gyrations of share indices and currencies in 2016 — and indeed the rise in value of share portfolios as a result of the Brexit upheaval (when common sense might have expected them to go the other way) are a reminder that the business of offering advice and suggestions as to how other people might deploy their savings is fraught with peril at the best of times. As Louise Cooper points out on page 34, the good performance of any investment fund relative to its peers in one year is no indication that it will continue to out-perform in the next.

    Of course, the full range of Spectator Money’s content is not presented as a model port-folio, and we are probably fortunate that it’s impossible to measure how readers might have fared by backing all our ideas over the past couple of years, from emerging market exchange-traded funds to silver, fine wine and some of the sporting and political bets suggested by our Speculator columnist, Freddy Gray.

    But we can at least look back at the tips offered by our ‘veteran investor’, Robin Andrews, whose market experience also stretches back to the 1960s. Over the past six issues (since October 2015) he has mentioned 37 shares or investment trusts, of which 23 had risen in price by earlier this month. On the admittedly artificial assumption that you or he had put an equal amount of cash into each of those stocks when tipped, and held on to them all, your portfolio would have risen in value by 23 per cent over 13 months — as good a result as you might get from the fanciest of Mayfair hedge funds, but without their performance fees sliced off the top.

    We highlight these figures with due humility, recognising both Louise Cooper’s point that top stock-pickers rarely repeat the trick year after year and the wider point that the intersection of politics and markets in today’s world means we should always be braced for shocks at the macro level that can derail carefully formulated investment strategies at the micro level.

    Nevertheless, the moral of our story is that investors should always keep their focus primarily on long-term fundamentals rather than short-term events. That may apply to established and trusted consumer brands; or to groundbreaking solutions in the fields of renewable energy or medical treatment; or to scarce and sought-after objects of beauty. Fundamental value, in all its forms, is what Spectator Money is about.