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Money Matters - Investments. "Buy / Build / Hold / Trim / Sell"

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People think differently. I was in a coffee shop the other day and, like most people in the bewildering setting of a coffee shop, was stunned by the sheer variety on offer.

If you think a coffee shop can be confusing, there are only normally 6 different coffees, 4 different cups of tea, 5 syrups and 20 savoury and 20 sweet snacks on offer. This means there are a total of 20,000 different meal options available.

So what makes a good investment?

When investing money, even if your chosen provider offers only 100 funds, to put together a portfolio of 10 investments you’ve got well over 62 billion billion (yes 62 x 1018) options. As an IFA, or a private investor, you’ve really got access to over 100,000 investments and the maths behind the number of possible portfolios is astronomically huge. (type ‘100,000!’ into your scientific calculator.)

There is no wonder that everybody has a different opinion on what you should be buying.

As a private investor, the key thing to do is to work out your style, then make sure that everything you own fits into your style pattern. That way you can at least be comfortable with the options you choose.


There are five broad categories of investment style and these are Active / Passive, Growth / Value, Big / Small, Top / Bottom and Technicals / Fundamentals.

I’ll cover off the last 4 choices in future articles, but this first article we’ll discuss the Active / Passive debate – easily the biggest question any investor asks.

These 5 broad areas are not just about one or the other, you may be completely neutral, although most people favour one side or another.

Active or Passive

So, like all these areas people have their own opinion and the broad arguments go something like this:

Active fund managers are often those which have smaller portfolios of companies that they have selected with a view to make more money than the benchmark. Quite often they can beat the markets over the short term.

The upside of this is that, if you are actively managing your portfolio and you’ve got a good idea of what the economy might do next you can buy into the fund manager who will take advantage of the new market conditions.

The downside is that you might get it wrong and undershoot the market, and charges tend to be around 3-4 times as expensive as a passive fund.

Passive funds track an index. There is no fund manager making decisions, nor is there a research team looking and moving money daily, there is a broker who will move the money with the index, perhaps only once a quarter.

The upside is that if you are going to leave your money for a long period of time, you’ll probably do better than if you invested in active funds and you’ll get the feeling of saving some money.

The downside is that you’ll miss out on short term gains, and you will never beat the market benchmark.

We all have our favourites here. Remember you don’t have to go with one style. For instance at the moment we are active in Europe due to wanting an active manager to take a broad approach to investing in Germany and France, but we are passive in the US as it is notoriously difficult to beat the markets.

Thanks for reading, next time we’ll get a little deeper into this subject, the aim being that by article number 5 you’ll be able to at least define your style. This means when investing money you’ll be able to sit down and see where everything fits.

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Our in house Independent Financial Advisors can help you with all aspects of financial planning including pensions, investments and inheritance tax planning. If you need any legal advice, please contact the Chattertons’ Wealth Management team at your nearest office