Investment Principles

Investment Principles

It’s a fact of life that all investment decisions involve a degree of risk.  Risk can be managed by applying the basic principles of investment. 

The two major principles are:

1. To maintain a spread of investments; and 
2. To evaluate your investments according to the time frame for which you have invested.

Your investment portfolios are recommended on the basis that financial markets fluctuate. However, with the benefits of diversification at all levels (ie, multiple asset classes; multiple managers and multiple stocks and securities) our investment process seeks to ensure that overall volatility is lowered and long-term investment returns are more consistent.

Investment Philosophy

Four key beliefs underpin the construction of our portfolios:

Risk management is crucial

There are multiple types of risk associated with investing.  In fact, some types of risk are essential in providing investors with long-term rewards.  There will always be fluctuations in the value of an investment and, while this risk cannot be entirely eliminated, at SSFS we are focussed on managing it.  This underpins one of our fundamental beliefs that risk management is as important as market returns.

Strategic Asset Allocation drives returns

Strategic Asset Allocation describes the medium to long-term allocation between asset classes within a diversified portfolio.  Our approach is to build portfolios that aim to deliver the best return for a given level of risk.

Market inefficiencies can be exploited

• Active Management
  Inefficient markets can lead to the mispricing of securities, and this creates opportunities which active investment managers can exploit.
• Strategic Tilting
  A strategic tilt is a temporary change (away from the strategic allocation) in asset class exposure.  We believe there is a role for risk-controlled strategic tilting where extreme market mispricing can be identified.  

Risk should be rewarded

Long-term investors should be rewarded for taking risk, known as equity risk premium.  At SSFS we believe that, over the long-term, equities will outperform bonds and this belief is reflected in the structure of our portfolios. Within our diversified portfolios, the Strategic Asset Allocation has allocations to equities to capture the equity risk premium.