“Faith is the bird that feels the light when the dawn is still dark.” Rabindranath Tagore
What We Believe
If we ever needed (another) lesson on how the stock market works surely 2023 provided exactly that!
After the Dow, the S&P 500 and the Nasdaq 100 (all US stock market indices) experienced peak-to-trough declines of between 21% and 35% in 2022 – by the end of 2023, all three were at new peaks (on a total return basis).
There are almost as many theories and explanations as to why this happened as there are market commentators, of whom I am definitely not one.
I would point out that the number of said commentators who successfully forecast both the market action of 2022 and that of 2023 is, to my knowledge, plus or minus zero!
In response to folly of forecasting the future, here at Brett Investment we instead endorse a systematic investment approach; one that is characterised by a high degree of diversification, low portfolio turnover and low cost.
Our General Principles
With 2024 upon us I thought it timely to share our investment beliefs/principles with you again. These are summarised below:
Our primary goal is to enhance or at least maintain the purchasing power of your invested wealth through astute long-term investing.
Long-term ownership of ‘The Great Companies of The World’ works:
Your portfolio indirectly grants you long-term ownership of the world’s great companies. Think Amazon, Microsoft, Coca-Cola, Walmart etc. The sustained success of these companies hinges on their ability to offer products and services that the global population continually desires or needs.
Human ingenuity is a unique human quality and serves as the driving force for the evolution of these companies. In short as global competition is so fierce these companies need to continually enhance what they do, merely to sustain their greatness.
In essence, this perpetual quest for improvement is embedded in their DNA and underpins why the global economy (and stock market) grows in size and wealth over time.
And as a long-term owner of these companies YOU get to share in the future prosperity this human ingenuity brings to the world.
Owners vs Lenders:
Historical data supports the idea that shares will outperform bonds over time. Rationally the owners of company shares must make greater returns than bondholders for businesses to thrive.
For most of our investors we recommend that your portfolio should own more shares than bonds.
If you wish to revisit the ‘%’ that you invest in shares relative to bonds, then please do let us know immediately?
The true measure of an investment is whether its total return exceeds inflation over the long term. Historically, shareholders have earned over twice the returns of bondholders, validating the resilience of global equities.
Volatility of Global Equities:
Global equities are more random than global bonds. This simply means higher highs and lower lows—aka volatility in both directions.
Unpredictability of Economic and Market Movements:
The economy cannot be consistently forecast, nor can the stock or bond markets be consistently timed. An investment approach reliant on such forecasts is destined to fail in the long run.
That is why we rarely ever change your portfolio. If we do make a change, it will be for a long-term strategic reason.
Diversification is the principle of spreading your investment risk around so that you’re well-positioned to capture the returns wherever and whenever they occur.
A significant proportion of the wealth created by global stock markets typically comes from only a small number of firms; therefore, we believe that literally owning 000s of these great companies is the most effective way for you to participate in the rewards they bring to the world.
Human Nature and Investor Behaviour:
Human nature, unaided, is incapable of detaching its investment policy / thoughts / fears / impulses from current events & trends for any length of time.
In short, human temperament equals a failed investor!
Our job is to help you overcome this inclination. This is crucial if you wish to be successful at long-term investing.
Our unwavering faith in the power of being long-term owners of the world’s great companies stems from the belief that, second only to love, human ingenuity is the most potent force on earth.
What we know is that human ingenuity is crucial to the success of any great company.
This dynamic is therefore the bedrock of enduring stock market success, as these great companies, in their quest not merely for survival but for prosperity, must continue to evolve and get better at what they do.
As their long-term owners (as a shareholder), YOU get to share in the ever-increasing wealth they bring to the world.
As ever, if you wish to discuss any of this please do reach out.