‘Set-and-Forget’ Investment Approach? Forget it!

duck on water RU Group Investment

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What is a ‘set and forget’ investment approach?

Do we advocate it?

In most walks of life when you employ a professional or craftsman, you expect a little bit of action for your money. Now is generally better than later, and more is generally better than less.

However, this generality does not apply in some areas. Take the case of a GP, for example, where a patient comes into the surgery with a very sore throat and flu-like symptoms. Today, many GPs feel under pressure to come up with a solution or to prescribe something such as antibiotics in order to fix a patient’s ailments. Dare we say some people even feel cheated when the advice is to take two paracetamol and to take it easy for a couple of days?

Do we doubt the training, experience and wisdom of the GP because of the advice we receive? Hopefully not. After all, science tells us that antibiotics don’t work on viruses, only bacteria.

The same pressures apply to advisers like us when it comes to investing. Adopting an evidence-driven, systematic investment approach can feel as if a portfolio, once set up, is just left to roll on in a ‘set-and forget’ manner. Every time you open your valuation statement outlining your portfolio, it is likely to look largely unchanged, both in terms of its structure and the products through which the investment strategy is implemented in practice.

One of these products is likely to catch your eye as it has not done as well as the others, or the portfolio as a whole is down and it might be tempting to ask, ‘What are you going to do about it?’. The answer is probably going to be, ‘Nothing!’ and that is usually – but not always – the right answer!

Our existing clients will now be familiar with us telling them to stay calm at times of market jitters, that we will rebalance their portfolio on a regular basis, that returns come from the markets, that a sensible long-term, diversified portfolio structure is key and to avoid looking at their portfolio too often!

A systematic, evidence-based investment approach often results in very little activity in a portfolio. It is wrong to think that this is the result of a ‘set-and-forget’ strategy. Considerable effort goes on behind the scenes to allow this state of calm consistency to exist.

It takes discipline and expertise to deliver the advice ‘not much needs to be done to your portfolio except for rebalancing’ and it comes from a rigorous process of ongoing challenge to the status quo.

Systematic Investing – The view from a client’s perspective:

  • Believe in markets
  • Own a diversified portfolio you can live with
  • Accept that returns come from markets, not humans
  • Capture the market returns you are owed
  • Rebalance back to the original strategy periodically

The most crucial message to take away from this article is that we advise all of these things, not because they are easy for us, but because the evidence suggests that this is what gives you the greatest chance of experiencing a good investment outcome.

You don’t have to look busy to provide good advice.

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