At AAB Wealth, we believe there is a notable difference between speculating and investing. We adopt a rigorous, systematic, evidence-based approach to investing.
We advise against speculating in temporary fads or the next 'big thing'. We instead hold true to tried and tested investment theory, supported by empirical evidence to build a robust long-term investment plan.
One of the great challenges that all investors face is that there is no easy or quick way to guarantee investment success – Aesop’s fable of the tortoise and the hare is a useful metaphor.
To ensure we continue to provide unbiased and unrestricted advice to our clients, our Investment Committee constantly reviews all relevant product and fund developments to assess the ongoing suitability of our investment proposition.
We believe in tuning out the noise that exists in the media, maintaining discipline, avoiding impulsive emotional investment decisions and following a well-conceived framework:
Step 1: accept the price
Step 2: beware of market gurus
Step 3: control your costs
Step 4: spread your risk
Step 5: be disciplined
Step 6: stay balanced
For many investors considering sustainable investing, their natural instinct is to want to avoid ‘bad’ companies, fossil fuel producers being a case in point; “I don’t want any oil companies in my portfolio” is a common theme that we hear.
Excluding them (divestment) might tick a box but the issue is more subtle than that. If you sell the shares of oil companies you will be doing so in what is known as the secondary market where sellers and buyers come together to transact.
If you sell, someone else has to buy those shares. By definition, they probably care less about oil companies than you do. They may offer you a lower price as you are selling based on preference rather than risk. But you will have washed your hands of the issue. Job done. Or is it?
An alternative approach is to retain ownership because it gives you the right to be an influence for good by getting your fund manager to put pressure on the firm to change and by voting at annual general meetings (AGMs) to help steer the company in a better direction.
Based on the premise that most investors own a portfolio to grow or protect wealth and create a source of current or future income, then the returns that their portfolio delivers are very important. Our traditionally structured portfolios are designed to deliver diversified, broad market returns derived from risks that we understand and knowing the likely characteristics they will deliver over time.
For many investors, making sure they receive broad capital market returns in return for taking on broad market risks to achieve their financial and lifestyle goals is important. If that can be achieved in a way that fulfils values-based preferences and makes a difference through a combination of active ownership and divestment, that would be a good start. It calls for pragmatic trade-offs, such as maintaining sector weightings in the portfolio broadly in line with the market. That may mean owning energy, utilities and airline stocks. This is our preferred approach – one that we call systematic environmental, social, and governance (ESG) investing.