“Diversify … As in much else, there is safety in numbers.”
(Sir John Templeton, Billionaire Investor and Fund Manager, 1912 – 2008)
The investment philosophy we have at Opening Doors Finance is based on a number of principles of legendary investors such as:
- Sir John Templeton
- Charlie Munger
- Warren Buffet and
- Benjamin Graham
These principles are combined with academic research studies that have a clear history in the financial markets.
When you entrust Opening Doors Finance to research the most suitable investment for you to invest your hard-earned money, here is a summary of our core investment principles:
- Focus on RISK not Returns.
We believe that Risk Management is the foundation of successful investing, whereas there is a tendency for many financial advisers to tell you about potential returns without sufficient understanding of the risks you really face. Typically, we will talk you through between 4 and 11 risk factors in order for you to know if an investment is really suitable for you.
- Asset Allocation & Diversification are vital.
Experienced investment managers will understand and apply these two principles, especially for you as a retail investor. Why? Because diversification has the general known effect of reducing your risk. It follows the age-old rule of “not putting all of your eggs in one basket”.
However, even when a fund does consist of just one asset class (for example, Stocks & Shares a.k.a. Equities), it is likely that a conscious choice has been made by the fund or manager to focus on just that one asset class. Although there may be no diversification in this instance, the principle of asset allocation has been followed still i.e. 100% of a fund’s money has been allocated to a single asset class. In general, this approach would tend to suit just a small proportion of investors.
- Outperforming the market is a difficult task. (But, therefore, NOT impossible!)
This is a foundation principle of some of the legendary investors shown above. Warren Buffet himself said that he “would be a bum on the streets with a tin cup if the markets were efficient!” (Fortune Magazine, 3 April 1995) Market inefficiencies do exist and stock selection is still a necessary skill (to whatever extent). There are Fund Managers that exhibit an understanding of these two dimensions of market behaviour.
- If you Invest, then Invest. If you Speculate, then Speculate. Don’t mix the two approaches.
There is nothing wrong with speculating in the financial markets. However, it is important that you make a clear distinction between the two strategies *before* you place any monies on the line. One key way to determine if you are an investor or a speculator is the timeframe you are planning to be in the markets. If at the outset your approach has a shorter timeframe and the asset class is further up the risk scale (e.g. equities or derivatives), then it is fair to say that your approach can be regarded as being more speculative than investment. Timeframes of less than 5 years for risky assets such as equities experience more swings in price movements and an investor is looking to capture the medium to long-term trend of an investment e.g. 5 years, 10 years, more than 10 years.
An investor looks to exploit TIME IN the market and does not focus on TIMING the market. That is our approach for you too.
To learn more about our approach to investment, contact us by telephone, email or submitting a Request for Financial Advice here and we will be only too happy to help.