Time Heals

Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” – Peter Lynch

These words from the enigmatic money manager, have stood the test of time, and will continue to hold true in the investment world, long after we have all left this earth.

Financial Advisors naturally become emotionally involved in their client’s financial affairs, especially during times of muted or sideways growth. This has been the case since June 2014 in South Africa. Clients and investment managers alike, are naturally influenced by the human survival bias – taking pre-emptive action to prevent hurt/ loss. This natural human trait is hard to shake, with history clearly showing us that it is probably the biggest hinderance to great long-term returns. This becomes ever so clear when one plots past events, that were expected to have a negative impact on the market; relative to the actual market reaction itself.

The most common statement that we receive from our clients, during periods of slow or muted growth is: “I would have done better had I just put this in the bank”. This may be true for a short period in time, but we know categorically that to follow this route over any extended period, is financial hara kiri.

The attractiveness of the “cash” argument is that these returns are linear – known or predictable. This is in stark contrast to growth assets, which are anything but linear in their return profile – unpredictable. The above graph going back to 1977 in South Africa confirms, beyond a shadow of a doubt, that not having long term exposure to growth assets is one of the biggest risks to any investor, whether in a pre-or post-retirement stage.


Skin in the Game

Given that the asset classes that afford an investor real (above inflation) growth are non-linear in their return profile, good investment growth can be whittled down to two key aspects:

  1. Time in an investment and not trying to “time” an investment.
  2. Robust management process, across all asset classes.

We like pictures, they can express a great deal very simply. An excellent example of the power of staying invested throughout market cycles or asset class undulations, is very clear from the graph below. This scenario assumes that one investor remained invested fully throughout 30 years on the S&P 500 (US stock exchange) generating a return of over 348%, while the other investor “missed” out on just 1% of the best days in the market and actually lost 73% of his money. The difference in returns is massive!


Prudent Management

We determined above that time is a key factor and given that time waits for no man, let’s expand on the second of the two points: Prudent management.

Harbour’s success has been to add considerable depth to this aspect of wealth management, underpinned throughout by a robust and independent investment and financial planning process.

We spend our time at Harbour on the following, which is integral to our value proposition:

  • Tactical Asset allocation – the dynamic change in our investment strategies’ asset allocation positioning, within strategic bands.
  • Independence – this allows Harbour to select the best tools for our investment strategies globally.
  • Income Pot Investing – a process that is proven to prolong capital/ income by 25%.
  • Controlling Costs – this is every client’s investment “overhead”.
  • Performance – Every investment strategy of Harbour’s speaks for itself.

The correct navigation through storm and swell, ensures that one can stay the course and reach each client’s unique destination.