Investing isn’t easy, but our approach makes it more straight-forward than you might expect.
Good investing requires a logical and robust framework grounded in investment theory and supported by empirical evidence.
The framework needs to be enhanced with an insight into the behavioural traps and pitfalls that all investors face; traps that can and do cost dearly.
We have spent considerable time creating an investment programme that we, and you, can trust.
We call this the Xentum Investment Philosophy
The first thing to remember is that there is no singularly best way to construct a portfolio, but there are certainly some portfolio structures that are more sensible – and robust – than others.
The Xentum Model Portfolios have been developed to meet your goals and objectives over time.
One of the biggest challenges that all investors face is in choosing which asset classes to invest in (and which to avoid). We base our choices on the ability of each asset class to meet our pre-determined selection criteria. The discipline of this framework allows us to review any asset class or investment strategy in a systematic way.
This forces us to engage our reflective mind and this defuses much of the emotion that can get in the way of a good, long-term investment strategy. Being comfortable with the assets held in your portfolios ensures that when markets get tough, as they will from time to time, you are able to remain disciplined and stick with the strategic decisions that were made in calmer waters.
Your portfolio will comprise two components; the first is what we call growth assets, which are higher returning, equity-like assets. To own an entire portfolio made up of these higher-risk investments – however well-diversified – would take some staying power when markets are in turmoil. So, most investors require a balancing allocation to assets that perform a high-quality defensive role, which predominantly tends to be high-quality bonds.
Risk differs from person to person and all investments carry risk.
For example, a cash deposit carries the risk that the return will not keep pace with inflation, whereas an equity investment carries the risk of a reduction in capital when prices fall.
In our experience, most clients have different needs in different financial planning areas and are willing or able to take a different level of risk to meet these needs.
Our Central Investment Proposition (CIP) is centred on a set of diversified, asset class portfolio strategies (model portfolios) which are positioned appropriately along the risk-return spectrum.
We like to talk about the way we invest as being systematic. What we mean is that we do things according to a disciplined system that is efficient, methodical, and objective.
Whilst, inevitably, we have to hold long-term views on the characteristics of asset classes that we use to build portfolios, we do not make short-term forecasts on the direction of markets or the value of individual securities. We put in place a sensible long-term strategy, live with it, and refine it over time if new products and evidence allow us to improve its structure. This approach is sometimes referred to, confusingly, as passive investing or index tracking.
The opposite of a systematic approach is a judgemental approach, which can be described as where a fund manager has the ability to act according to their own discretion or judgment to make subjective forecasts of short-term market or security prices in order to try to beat the market. This is often referred to as active investing.
We hold a deep conviction that in selecting well-managed, low-cost, systematically managed funds, we will be providing you with the best chance of capturing the bulk of the market returns that are on offer.
Trying to identify judgemental managers, who can persistently overcome their fees and costs to deliver market-beating returns, is extremely difficult and requires long-term track records to discern skill from luck. Picking funds that will even be around for the long-term is a tough starting point given the poor survivorship record of many funds in the industry.
Living with the inevitable under-performance that will occur from time to time when employing judgemental fund managers is not for the faint-hearted and may well lead to impatience and ill-discipline, and we know that this can severely compromise investing outcomes.
Ongoing Monitoring & Delivery
We recommend that portfolios are rebalanced at regular intervals otherwise ‘portfolio drift’ will change the risk characteristics over time.
We use an investment platform to allow access to a wide range of tax wrappers, funds, and online servicing. This means we can manage your capital in an efficient and cost-effective manner.
As independent financial advisers, we are able to research the entire marketplace across a broad range of due diligence criteria, to establish the most suitable solutions to meet your circumstances and objectives.
Although in most situations our core process is the optimal way to manage portfolios, there can be circumstances where a different approach is needed.
There may be very specific tax issues to address or an investment mandate that has unique characteristics and requires a tailored methodology.
Under these circumstances, we are able to use discretionary fund managers (DFMs) to deliver highly bespoke investment portfolios based upon individual circumstances and objectives.
One area of the market we believe should only be delivered through a discretionary service is ESG (Environmental, Social & Governance) investing.
ESG Investing (also known as socially responsible investing, impact investing and sustainable investing) refers to an approach which prioritises stocks demonstrating strong environmental, social, and corporate governance characteristics.
We offer a range of wealth management services that are tailored to meet your exact needs. Your financial planner will help you identify which combination of services will help achieve your goals.