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Wisdom in Wealth: Authentic Investing Principles

In the world of investing, the age-old adage “If it sounds too good to be true, it probably is” holds profound significance. Investing inherently involves a trade-off between risk and return. The higher the expected return, the greater the risk one must accept.

What is Authentic Investing?

Authentic investing transcends mere avoidance of high-risk investments. It embodies wisdom, evidence-based strategies, and insights gleaned from decades of empirical academic research. At its core, authentic investing is a long-term endeavour, leveraging the positive-sum game of the market. It’s about embracing the rewards of lending and ownership while steering clear of futile attempts to outperform the market.

The Reality of Active Management

Attempting to beat the market, as pursued by active fund managers, often leads to disappointment. Professor William Sharpe, a Nobel laureate in Economics, elucidates that the average active investor’s returns typically lag behind the market, eroded by fees and trading costs.

2 people practicing Authentic Investing

Three enduring beliefs

At Wells Gibson, authentic investing implies that it’s true, real, proper and right. It’s a way of describing evidence-based investing and starts with you accepting three enduring beliefs:

  1. Long-term investing yields market rewards.
  2. Identifying market-beating skill from luck is challenging.
  3. The risk-return relationship prevails, mitigated through diversification.

Once you have accepted these three enduring beliefs, it’s time to adopt four simple steps to owning an authentic investment portfolio.

Key Steps to Authentic Investing

  1. Diversification: Spread investments across various assets, sectors, and geographies to mitigate uncertainties.
  2. Passive Funds: Opt for low-cost, systematically managed funds, which offer the best chance of capturing market returns.
  3. Cost Management: Minimise financial and emotional costs associated with investment decisions to enhance returns.
  4. Portfolio Rebalancing: Regularly realign your portfolio to maintain a consistent risk profile in line with your financial goals.

Why Partner with a Trusted Wealth Advisor?

While some may achieve success as DIY investors, the reality is that market-beating skill is rare and challenging to discern. Most active fund managers fail to outperform their benchmarks over the long term. Moreover, performance persistence is elusive, making sustained success improbable.

As individuals near retirement, ensuring financial security for the long haul becomes paramount. A trusted wealth partner helps establish and manage a systematic, risk-focused portfolio, providing discipline during market fluctuations. With a myriad of investment options available, navigating the complexities of the market requires expert guidance and a steadfast commitment to long-term financial well-being.

In conclusion, authentic investing is not a sprint but a marathon—a lifelong pursuit aimed at securing financial stability and leaving a lasting legacy. Partnering with a trusted advisor empowers individuals to navigate the complexities of the investment landscape, ensuring a prosperous and fulfilling financial future.

“You can Google knowledge. You cannot Google wisdom.”

– Anonymous

Contact Wells Gibson to embark on your journey towards authentic investing and secure your financial legacy.