Many of the world’s leading investors will tell you that nothing is more important to long-term investment success than a clear investment philosophy.
An investment philosophy is based on the intractable belief you have in the principles and practices that guide your decision-making. In times of market upheaval and through the dark of uncertainty, your investment philosophy enables you to control your emotions, shut out the noise and focus on the things that really matter over the long term. Your investment philosophy keeps you focused on the process, which is your investment strategy.
This is particularly important when advising private individuals. As behavioural economics has shown, people are in reality much more risk adverse than they might own up to; and that under stress they make highly reactive decisions. In the investment markets this can be very expensive.
If you’re able to clearly articulate the ‘why’ of their investments this will help your clients in exactly those moments.
An investment philosophy can usually be derived from two mainstream approaches;
Some examples of investment philosophies of well-known investors include:
Other examples of brief but all-encompassing investment philosophy statements:
It can be particularly helpful as a financial adviser to be able to articulate the elements of your investment philosophy. It helps your client understand and so entrust you with utmost confidence. Whatever your philosophy or belief’s, this will determine your strategy and how to implement it.
Having worked as a specialist financial planner since 1991, Matthew has extensive experience in providing advice to successful individuals such as senior corporate executives, professionals and self-employed business executives. His plain-English approach to complicated financial and regulatory subjects has won him a loyal client following.
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