Our research begins by examining the recent past performance of an investment fund.
Although past performance is no guarantee for the future we can examine the fund and the fund manager’s track record. We are particularly looking for consistency and a historical analysis gives us a good indication of the fund’s future prospects.
As global economic conditions fluctuate we need to be sure that our fund selections are continuing to perform in line with our expectations. We use a range of investment tools to check that a fund continues to “do what it says on the tin”. Detailed research will include the use of Risk and Reward Scatterplots, a Correlation Matrix and Stock Overlap analysis. Examples of these tools can be found on the Financial Express website.
We can use the UK Equity sector to illustrate our investment process.
Financial Express is used to filter out individual funds which do not meet our various criteria regarding matters such as fund objective and performance consistency. We regard the net return from a fund as more important than its management charges, although we will monitor every aspect of a fund.
It is important that we keep your portfolio diversified, so we also check on the individual equities which selected funds are investing in, at any one point in time. For example, we would want to know if the Fidelity Special Situations Fund was investing heavily in Shell, so as to avoid other UK Equity funds which were over over-exposed to Shell shares.
Each Asset class will have sub-divisions, usually based on the differences in Risk and Return. In our UK Equity sector we have separate sections covering small, medium and large companies. Generally speaking, smaller companies are more volatile and carry more risk, albeit a greater opportunity for growth. We balance your portfolio investment in the UK Equity market by allocating money to all these sectors.
There are similar splits in other Asset classes. For instance, within Fixed Interest we find Government Gilts and Corporate Bonds. These are instruments used by Government and companies to raise money and both will present varying levels of Risk.
Argyle can not predict the future, but we will invest your money in a diversified fashion to provide some protection from the volatility of the world’s markets.