I was reading Investors Chronicle from 12 January - 18th January 2018 (with Cover Story ‘Portfolio Secrets‘) and on page 24, in John Baron’s column, ’The Year Ahead’ he wrote this chunk of text about his approach regarding his Portfolios:
“Instead, Investors should remain loyal to tried and tested investment principles. When deciding the portfolios’ strategy, little attention is paid to short term market ’noise’ - from wherever it originates. The most important determinant is the ability of companies to create wealth and add value, and the conditions that sustain such an environment. The focus remains on the longer term when assessing sentiment and fundamentals, and volatility is therefore seen as an opportunity.
The portfolios remain invested and seek to add value over time - wiser investors are left to try to time the markets. Such an approach also allows the full harvesting of dividends, which become an increasingly important contributor to total return - the portfolios’ higher yield, relative to benchmark, acknowledging the significant role played by income over time. In helping to protect past gains, the portfolios also acknowledge the importance of rebalancing and diversification as time passes - both remaining undervalued disciplines.
Meanwhile, a ‘holistic’ view is taken of the portfolios. Changes should not solely be seen in isolation - as simply a list of individual trades - but rather as part of the whole, as portfolio management usually reflects a range of factors. The portfolios also adhere to the principle that investment is best kept simple to succeed. Complexity adds costs, risks confusion and usually hinders performance.
In the round, such an investment approach perhaps allows for a calmer assessment of opportunities, and recognises the importance of maintaining poise and purpose when markets go awry.”
I really like this Summary of John’s approach as it is pretty short and concise and clear on how he does things (and well worth reading a few times) - I suspect it is text he originally wrote many years ago and over time he has refined it down to the current version. John is a very successful Investor (and an MP bizarrely) and he uses Investment Trusts to create a variety of Portfolios and runs a Website here (although sadly he is less open about his holdings and stuff lately, but he does list them in Investors Chronicle for his ‘Growth’ and ‘Income’ Portfolios):
Returning to the Text I copied from Investors Chronicle, I feel it largely chimes with my own views on how to run a Portfolio although of course John uses a Funds approach whereas I am moving away from Funds and doing my Investing with individual Stocks in the main. There are various bits I want to draw attention to:
That covers it, check out the ‘Related Blogs’ I have suggested below which in a few cases might actually relate to the subject !!
‘Cut out the Noise’ Blogs - there are links to the earlier Parts at the bottom of this one:
A Blog on bias - I recall this one was very popular when first wrote years ago:
Price vs. Value (again there is a Link to Part 1 in it):
Position Sizing ones:
The detail in this one might have changed a bit now but I reckon it will still be worth reading - chimes with my comments on being ‘Robotic‘:
This one is related to the Diversification bit:
Compounding Blog - I suspect many Readers have seen this a thousand times !!
Dealing with bad markets:
This one perhaps has little to do with this Blog but I tripped over it while looking through the Archive and thought it needed an outing as many newer Readers may not have seen it before:
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