Every investor would like certainty. We would all like to know which markets will do best next year, which funds will outperform, and when the next downturn will arrive. Adverts and headlines often imply someone can tell you. Almost nobody can, with any reliability.
Investing is really an exercise in making decisions under uncertainty.
The reassuring part is that successful investing does not need certainty. It needs a series of sensible decisions, each one tilting the odds, sometimes only slightly, in your favour.
No single decision guarantees an outcome. But a collection of sensible decisions, combined into one disciplined process, gives an investor a far better chance of a good long term result.
Below are eight decisions that shape our investment process, with a sample of the evidence behind each one. This note only scratches the surface of the research that sits underneath.
We own productive assets, not cash
When you invest in shares, you become a part owner of businesses: companies that employ people, build products, provide services and, with any luck, generate profits. Over time those businesses create wealth and pass some of it to their owners through dividends and rising share prices.
History shows ownership has paid off. Global equities have delivered noticeably higher long-term returns than cash and bonds, though with more short-term ups and downs along the way.
The evidence:
Between 1979 and 2025, global equities returned around 7.8% a year after inflation, against around 2.4% from high quality bonds. Compounded over that period, the gap is roughly tenfold.¹
We build robust portfolios rather than forecast markets
Financial markets are crowded with participants, all reading the same information. When an easy profit appears, it tends to be spotted and acted on quickly, which is part of why it stops being easy.
Rather than try to call short term market moves, we think investors are better served by accepting the uncertainty and building portfolios robust enough to capture the growth markets deliver over the long run. That means spending our time on the decisions we can control, not the ones we can’t.
The evidence:
Most active fund managers fail to beat their benchmark over the longer term, particularly once costs are taken into account. A long term asset allocation, not manager selection, is the main driver of a portfolio’s risk and return.²
We diversify widely
Nobody can say with certainty which company, country, sector or investment style will perform best. Diversification is the most reliable answer to that uncertainty.
Today’s global market holds tens of thousands of listed companies across every industry and region. Owning a broad sliceof them gives you exposure to the productivity of the whole global economy, rather than a bet on a handful of names. Low-cost funds make this straightforward to do.
The evidence:
Only 4% of listed companies that have existed since 1926 account for all of the market’s returns. Most underperformed cash.³
We keep costs low, without cutting quality
Cost is one of the few parts of investing you can control with certainty.
Every pound paid in fees, trading costs and tax is a pound no longer working for you. Small deductions compound into large differences over time.
Before costs, investors collectively earn the market return. After costs, they collectively earn less than the market return. A lower-cost investor starts the race ahead of a higher-cost one.
The evidence:
A strategy’s cost is one of the most reliable predictors of its outcome. Lower fees are consistently linked to better results.⁴
We tilt towards rewarded risks
This point is subtle but matters. Broad market exposure is a sensible starting point for anyone. But not all companies are alike, and the evidence suggests that modest tilts towards parts of the market where investors have historically been paid for taking on extra risk can improve expected outcomes.
Smaller companies and “value” companies (those trading cheaply relative to their fundamentals) are two well-researched examples. These characteristics don’t produce a higher return every year, and nobody expects them to. But because they carry more economic risk, investors have historically been paid to hold them.
The evidence:
Since 1972, smaller and value companies have outperformed a broad market portfolio by 1 to 2% a year.⁵
We stay patient
Every generation of investors lives through a period that feels different, dangerous and unprecedented. Market falls, recessions, geopolitical shocks and financial crises are recurring features of investing, from the tulip mania of the 1600s through to the pandemic driven fall of 2020.
The temptation in a difficult period is to act. Unfortunately, investors tend to act at exactly the wrong moments: growing confident after markets rise, and fearful after they fall. Poor investor behaviour is a well-documented drag on long-term returns.
The evidence:
Investors who chase performance or sell in a panic earn, on average, 1.2% less per year than those who stayed the course.⁶
We rebalance systematically
When equities rise, they naturally take up a larger share of a portfolio, and the reverse is true when they fall. Left alone, a portfolio’s risk level can drift a long way from where it started. Rebalancing means periodically restoring the original target weights.
It can take some resolve to sell into a rising market and buy into a falling one. But that discipline is what keeps a portfolio at the risk level agreed with the client in the first place.
The evidence:
Left unrebalanced, a portfolio that started at 60% in shares could have drifted to around 80% in shares over the ten years to April 2026. That is a meaningfully different portfolio to the one originally agreed.⁷
We implement with care
Even a sound investment philosophy can be undone by poor implementation. Once decisions on asset allocation, diversification and structure are made, they still have to be carried out well.
We look for funds that are broadly diversified, systematically managed, and focused on capturing the return an asset class has to offer, not funds built around a star manager or a recent run of good performance. As an independent firm, we’re free to choose across a wide field of options rather than a house range.
The evidence:
Over 20 years, only around 2% of the starting universe of professional fund managers beat a fair benchmark after costs and risk are accounted for. Choosing a fund on past performance alone tends to disappoint.⁸
No investor controls market outcomes. Every investor controls the decisions behind their portfolio. Guided by evidence, those decisions can be structured to give you the best available chance of a good long term result.
Where this leaves you
If any of this raises a question about your own plan, or you would simply like to talk it through, we are always happy to hear from you.
Risk warnings
This note is for general education. It is not investment advice, and nothing in it should be read as a recommendation to buy or sell any investment. Views expressed are our own at the time of writing and may change without notice. Past performance is not a guide to future returns.
Where specific products or fund types are mentioned, this is for illustration only. It is not due diligence on, or a recommendation of, any specific product.
Wells Gibson is authorised and regulated by the Financial Conduct Authority (Firm Reference Number 731027).
Sources
| No. | Reference |
|---|---|
| 1 | Inflation: UK RPI to 31/01/88, UK CPI thereafter. Bonds: Albion Short Gilt Index (0–5). Equities: Albion World Stock Market Index. Returns in GBP, after inflation. Period: 02/79–12/25. |
| 2 | Ibbotson, Roger G., and Kaplan, Paul D. (2000), “Does Asset Allocation Policy Explain 40%, 90% or 100% of Performance?”, Financial Analysts Journal, Vol. 56, No. 1. |
| 3 | Bessembinder, Hendrik (Hank), One Hundred Years in the U.S. Stock Markets (18 March 2026). Available at SSRN: ssrn.com/abstract=6438198. |
| 4 | Kinnel, R. (2016), How Fund Fees are the Best Predictor of Returns; and Ptak, J. (2025), What Worked for Fund Investors? Pinching Pennies and Letting Winners Run. |
| 5 | Albion Research Indices. Albion Developed Stock Market / Value / Small Index. See smartersuccess.net/indices. |
| 6 | Morningstar (2025), Mind the Gap: Why do investors experience a return gap? |
| 7 | Albion World Stock Market Index and Albion Global Short Bond Index (0–5, GBP), before inflation. Period: May 2016–April 2026. |
| 8 | SPIVA® U.S. Scorecard, Year-End 2025. 20-year results, “All Domestic Funds” category, risk-adjusted figures. |
