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With the removal of the uncertainty created by the threat of war
the so-called “Baghdad Bounce” has driven share prices up by over
20% from their March lows. However, over the recent months some
commentators have started to refer to another cloud on the horizon,
the prospect of deflation – falling living costs. While history
cannot be relied upon to repeat itself, it would be a brave man or
woman who decides to bet against the history of the last 50 years by
assuming that inflation will not return and that it is safe to keep
one’s money in cash or near-cash for the longer term. History, and
the desire of Governments to spend ever more on schools, hospitals
and social services than they can collect in taxes, strongly
suggests that we will again have to live with the impact of
significant rates of inflation, and perhaps sooner than we think.
Is the time right?
How do you know when it is the best time to invest in a stock market
related investment? Well, you don’t – and nobody does. Of course,
the ideal time to invest is when prices are at their low point, just
before they start to rise again. However, there are simply too many
factors, many of them totally unpredictable, for anyone to know with
any certainty what the market will do in the short-term.
Long-term investors shouldn’t try and time the market. Instead
investors should focus on their long-term objectives, create a plan
that will help them get there and invest when they have the money
available. Rather than timing the market the best way to protect
yourself from its excesses is to be well diversified across asset
classes – cash, fixed income and equities – and choose good quality
professional managers to look after your investments.
Looking back in 10 years time investors may well fall into two
categories, those who say, “I’m glad I did” or those who complain,
“I wish I had”. Long-term investors are likely to find that
spring/summer 2003 was an excellent time to invest.
The problem: How do you choose a good investment manager?
Comparing past performance can only give you part of the picture. A
one or two year period is too short a time to assess a manager. Even
the best managers will sometimes under-perform the market over a
short period. By the same token, even the worst manager may achieve
impressive performance over a relatively short period, as happened a
few years ago when managers who invested in the high technology
‘bubble’ looked good – for a while.
For a reasonable comparison, you need five years or more of
performance but of course no one wants to wait five years to find
out that they’ve chosen the wrong investment manager.
You also have to recognise that past performance is no guarantee of
future performance. The people who achieved this successful past
performance may have left the firm, or the style which worked so
well in the past may not be right in future market conditions.
And even if all the evidence indicates that a particular individual
may be the best person to manage your money, putting all of your
money with one or even two managers is too high a risk to take.
The unique St. James’s Place approach to investment management
Successful investment is critical to your future financial well
being, but it is a field which presents a unique problem: future
performance is unpredictable.
As a result, when you choose someone to manage your money, no matter
how successful he has been in the past, you can never be sure that
you have made the right choice. And even if you have, it may not
continue to be the right choice over the years to come.
The St. James’s Place Group adopts a radical and effective solution
to this problem. Recognising that no single investment house has a
monopoly of investment expertise as they do not employ any in-house
investment managers. Instead they carefully select a number of
external managers of outstanding ability to manage the range of
funds.
The benefits of diversification
By selecting a number of leading fund managers, each with their own
distinctive investment styles, St. James’s Place Partnership is able
to provide clients with real diversification of risk. In this way,
they believe they offer the opportunity of aiming to obtain
consistent, superior investment performance over the medium to long
term.
Whilst no one can guarantee future investment performance, they
offer you what they believe is a superior investment process which
aims to maximise your chance of achieving a better return over the
medium to long term.
As a next step, talk to your St. James’s Place Partner about putting
into place your own wealth management strategy.
For further information on investments, please contact Nic Uglow, a
Partner of the St. James’s Place Partnership, on 020 7744 1500.
St. James’s Place, 117 Piccadilly, Mayfair,
London W1J 7JS |