PRIVATE CLIENTS

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Investment philosophyAllocate / Diversify / Invest

WAGSWEALTH.CO.UK

03INVESTMENT PHILOSOPHY

WAGSWEALTH.CO.UK

02 INVESTMENT PHILOSOPHY

We believe in longer term investment based on goals and objectives. Short-term investment is speculation. Short-term focus is led by emotion and can be defined as gambling.

We need to be patient, have a sound plan based on your long-term objectives. Emotions are often influenced by external events. Fear and greed drive sentiment.

Most investment managers have a compelling story to tell and we all like a good story. They think that forecasting what will happen to interest rates, inflation, when to get into different asset classes, market timing, stock selection and active management adds value. The assumption they make is that they are smarter than anybody else because they have the knowledge, experience and resources to outperform the market.

This adds up to speculation – speculating about the future is a risky game. The future is unknown so basing investment decisions on the unknown is inherently risky.

There is no credible evidence to support the idea that active management enhances investment results over appropriate index benchmarks. In fact, the overwhelming evidence is

that neither individual stock selection nor market timing strategies add sufficient value consistently enough to outweigh their cost. Annual research from Standard & Poors highlights that over 5 years (to end 2011) that only c35% of Active Fund Managers outperformed their index*. These same underperformance figures are repeated in research during 2008, 2009, 2010; across different asset classes (Equities and Fixed Income) and Geographies (USA, Europe, Emerging Markets etc).

Keep your objectives in mind; don’t let short term events influence your judgement or deter you from your desired, long-term goals.

INVEST NOT SPECULATE

INVESTING TAKES DISCIPLINE

All portfolios should be diversified across different asset classes to reduce risk. We all understand the basic concept of diversification to reduce risk: don’t put all your eggs in one basket. We can help you understand risk and how it can help in setting your goals and objectives.

Nobel prize winning research demonstrates that the most prudent approach to minimising risk and maximising the probability of achieving the average expected index return is to hold the entire index.

Within each asset class we seek to diversify further. For example equities can be segmented additionally into large and small companies, growth and value, domestic and international. This diversification helps to reduce risk and increase the expected return of your portfolio.

Diversification reduces uncertainty and therefore risk. Instead of trying to pick winners from thousands of stocks, funds and managers, it allows you to gain access to sectors of the market that are appropriate to you and your risk profile. By investing in asset class funds we aim to deliver the investment results of an entire asset class.

By utilising asset class funds to deliver the returns of underlying asset classes, you don’t incur the risks of active management i.e. cost, manager underperformance, excessive risk or style drift. And by accepting market rates of return, minimising costs, maintaining discipline and diversification, you are more likely to achieve your long-term goals and objectives.

We utilise these asset class funds as building blocks to create efficient portfolios, achieve portfolio diversification and focussed asset allocation.

This approach puts the key drivers of investment success within your control. Markets, work, risk and return are related. Intelligent asset allocation determines the vast majority of investment return. We can set strategic asset allocations based on your risk profile, without the need to predict markets.

DIVERSIFICATION IS VITAL INVEST IN ASSET CLASS FUNDS

Academic research provides firm, empirical evidence that in excess of 90% of returns in a portfolio are achieved by asset allocation and not individual stock selection**.

We build a strategic asset allocation based on your objectives, goals, circumstances and attitude to investment risk.

This strategic asset allocation encompasses a diverse set of assets. The outcome is an optimised portfolio derived from likely future returns and correlations between the various assets.

The portfolios are based on modern portfolio theory, Nobel laureate research and investment history.

*Source: Standard & Poors Indices V Active Funds Scorecard, Year End 2008 (April 2009) & Year End 2009 (March 2010)

**Source: Brinson, Hood and Beebower: “Determinants of Portfolio Performance” 1996 suggested that well over 90% of the variation in investment performance of US pension plans could be explained by differences in asset allocation.

ASSET ALLOCATION

90%

Emotion

Risk Return

Leading to gambling

30%

ACHIEVABLE RETURNS

In excess of 90% of returns in a portfolio are achieved by asset allocation and not individual stock

Circa 30% of Active Fund Managers outperformed their index.

THE HIGHEST LEVEL OF CUSTOMISATION IS CENTRAL

TO OUR OFFER. UTILISING OUR CONTINUED

EXPERIENCE IN THE CONSOLIDATION, PROTECTION,

GROWTH AND LEGACY OF OUR CLIENTS’ WEALTH.

Wagstaffs Private Clients, Richmond House, Walkern Road, Stevenage, Herts, SG1 3QP.

T: 01438 740074 E: info@wags.co.uk W: wags.co.uk

PRIVATE CLIENTS

We understand the general requirements of wealth planning - but we also understand the uniqueness of each and every client.

Our aim; simply to share our expertise to ensure the realisation of your thinking.

Need to state Wagstaffs Private Clients is a trading style of Wagstaffs Wealth Management Ltd. It is authorised and regulated by the Financial services Authority. FSA Registration No: 116384