The Purposeful Wealth Podcast
Do you want to live a fulfilled and meaningful life? In this podcast, Jonathan introduces his principles for living a fulfilled and meaningful life, as well as sharing the key financial and wealth planning strategies you need to focus on to achieve this.
The Purposeful Wealth Podcast
Key Questions For The Long Term Investor
In this episode, Jonathan Gibson highlights some of the key questions that a long term investor should consider.
There are many different aspects of long term investing that a financial planner can help bring to light, including: the kind of competition one might face; the odds of picking a successful investment fund; and how to build a diversified portfolio. It's crucial to have an experienced professional guiding you through the journey.
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This podcast is hosted by Jonathan Gibson, the Managing Director of Wells Gibson Limited. He is a Chartered Financial Planner, Certified
Financial Planner Professional and Chartered Wealth Manager.
Jonathan Gibson is also the author of the book "Purposeful Wealth - How to bring Clarity, Contentment and Certainty to your Financial Life."
To get in-touch with Jonathan, find him online:
Find all our useful links on our LinkTree - https://linktr.ee/jonathangibson
And why not visit us at: https://www.wellsgibson.uk/
And get a copy of the book, Purposeful Wealth here: https://www.amazon.co.uk/Purposeful-Wealth-Contentment-Certainty-Financial/dp/B08T42FNGM
Welcome to the Purposeful Wealth Podcast, the go-to podcast on how to bring clarity, contentment and certainty to your financial life. Brought to you by Jonathan Gibson, founder of Wells Gibson and author of the Purposeful Wealth book. Pick up your copy of Purposeful Wealth on Amazon and please enjoy this show.
SPEAKER_01:Welcome to the Purposeful Wealth Podcast. Whether you've been investing for decades or are just getting started, at some point on your investment journey you will probably ask yourself some of the questions I am going to cover today. Trying to answer these questions may be intimidating, but please know this, you are not alone. As your financial planner, I am here to help. And while this is not intended to be an exhaustive list of questions, it will hopefully shed light on a few key principles using data and reasoning that may help improve your odds of investment success in the long run. So let's consider some of these questions. Question one, what sort of competition do I face as an investor? Well, the market is an effective information processing machine. Millions of market participants buy and sell securities every day and the real-time information they bring helps set prices. This means competition is stiff and trying to outguess market prices is difficult for anyone, even professional money managers. However, this is good news for investors. Rather than basing an investment strategy on trying to find securities that are priced incorrectly, As an investor, you can instead rely on the information that's already in market prices to help build your portfolio. Well, flip a coin and your odds of getting heads or tails are 50-50. Historically, the odds of selecting an investment fund that was still around 20 years later are about the same. Regarding outperformance, the odds are worse. The market's pricing power works against mutual fund managers who try to outperform through stock picking or market timing. And as evidence, only 19% of US equity mutual funds and 11% of US fixed income mutual funds have survived and outperformed their benchmarks over the past 20 years. Next question. If I choose a fund because of strong past performance, does that mean it will do well in the future? Some investors select mutual funds based on past returns. However, research shows that most US mutual funds in the top quartile of previous five-year returns did not maintain a top quartile ranking in the following five years. In other words, past performance offers little insight into a fund's future returns. Do I have to outsmart the market to be a successful investor? What a good question. Financial markets have rewarded long-term investors. People expect a positive return on the capital they invest. And historically, the equity and bond markets have provided growth of wealth that has more than offset inflation. Instead of fighting markets, let them work for you. Let the markets do the heavy return lifting. Is there a better way to build a portfolio? Academic research has identified dimensions of expected returns with regards to fixed income and equities, which point to differences in expected returns among the different securities. So instead of attempting to outguess market prices, investors can instead pursue these higher expected returns by structuring their portfolio around these different dimensions, which a financial planner should be able to explain to you. is international investing for me. Diversification helps reduce risks that have no expected return, but diversifying only within your home market may not be enough. Instead, global diversification can broaden your investment opportunity set. So instead of just owning a share in the great companies of your home market. There's an opportunity for you to share or own a share in the great companies of the world that produce goods and services that the world wants or the world needs. By holding a globally diversified portfolio as an investor, you are so well positioned to seek returns wherever they occur. Now, I think this is a good question. Will making frequent changes to my portfolio help me achieve investment success? It's tough, if not impossible, to know which market segments will outperform from one period to the next. Accordingly, it's better to avoid market timing calls and other unnecessary changes because they'll probably be costly. Allowing emotions or opinions about short-term market conditions to impact long-term investment decisions can lead to disappointing results. Can my emotions affect my investment decisions? Many people do struggle to separate their emotions from investing. Markets go up and markets go down. Reacting to current market conditions may lead to making poor investment decisions. So we do need to try and keep our emotions in check. Should I make changes to my portfolio based on what I'm hearing in the news? Daily market news and commentary can challenge our discipline as investors. Some messages can stir anxiety about the future, while other messages can tempt us to chase the latest investment fad. If headlines are unsettling, consider the source and try to maintain a long-term perspective. So having considered some of these questions, what should we be doing as an investor? In the first instance, you want to work closely with a financial planner who can offer expertise and guidance to help you focus on the actions that add value. Focusing on what you can control can lead to a better investment experience. So create an investment plan to fit your needs and risk tolerance. Structure a portfolio along the dimensions of expected returns. Diversify globally. Manage expenses, portfolio turnover and taxes. and stay disciplined through the market dips and swings. Thank you for listening to the Purposeful Wealth podcast.
SPEAKER_00:Thank you for listening to Purposeful Wealth. Please remember to subscribe, review and come back next week for your next installment. You can also visit the wellsgibson.uk website for more information on bringing clarity, contentment and certainty to your financial life.
SPEAKER_01:The Purpose for Wealth podcast is powered by Wells Gibson Limited, which is authorised and regulated by the Financial Conduct Authority. This podcast does not constitute financial advice and the listener should not regard any of the financial information provided as a personal recommendation. The advice and strategies highlighted might not be suitable for every situation. It is your responsibility to seek the services of a competent professional if assistance is required. Neither Wells Gibson Limited nor the publisher shall be liable for damages arising herefrom. Investments involve risks. The investment return and principal value of an investment may fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original value. Past performance is not a guarantee of future results. There is no guarantee strategies will be successful.