Investment Securities

If it looks too good to be true, it usually is. This could not be more applicable than when it comes to selecting the underlying securities; the landscape is littered with ill-informed choices that have ended in disaster.

There are literally hundreds of factors that will influence the success of any investment but these are the main headliners. Whether you make your own selections, or opt for us to help you out, the same guidelines apply.

Liquidity

• Most retail investors never check this most fundamental feature. If a security has liquidity issues – i.e. it cannot be sold quickly to other buyers – its value and performance become irrelevant.

• Weird funds, Property, Land, Student Accommodation, Mortgage-Backed and other ‘solid asset’ funds like Wine, Trees or Carbon Emission Trading are prime examples. If there are no buyers for whatever reason the exits can become very crowded and not everyone will be able to get out.

Transparency

• Warren Buffet famously said during the .com boom of the late nineties that he did not buy these stocks as he did not understand them. Complex asset backed funds offered by so many are opaque, difficult to understand and have many hidden fees so are best avoided. As Warren did, and was right.

• Our mantra is “We buy what we understand and we understand what we buy”. Sticking to this has served us well; anything else would simply be guesswork.

Value

• Buy low, sell high. If only it were that simple but a few checks will give a reasonable assessment whether an asset is either ‘cheap’ (oversold) ‘expensive’ (overbought) or ‘fair value’. Never an exact science but buying assets that clearly are over-priced is something best avoided.

• Herd mentality often prevails in many cases with the masses leaping on the bandwagon of the day and paying way over the odds for any number of securities. Bubbles are not that difficult to spot using the rear-view mirror.