I first stumbled across Andrew Craig’s book, How to Own the World towards the end of 2016. To say the book was an eye opener for me is a bit of an understatement.
Now, any regular readers among you will know that I began my formative years in finance, working as an equities analyst. I also spent many years working with fund managers and getting insights into fund performance. So, you’d think that my grounding in finance should equate to some kind of control of my own investments.
Well, you’d be wrong.
I’ve had company pensions and savings which should ensure that my wife and I are relatively comfortable in retirement, but until recently, I wasn’t managing that process myself. Instead, preferring to pay high fees for the privilege of someone to manage it for me.
However, reading ‘How to Own the World’ last year changed all that. It gave me the inspiration I needed to take control and start managing my own long term investment strategy.
The strategy is a simple one for those who have the confidence to implement it. Diversify your exposure through as many different assets as you can, across as many geographical regions as possible.
When one particular asset is losing value, it will be offset by another.
Here’s why you should ‘Own the World’
For example, during the financial crisis, UK equities on average lost around 40% of their value at their lowest point. However, Gold, which is seen by many investors as a safe haven, grew in value in 2009 by 25% and another 30% the year after.
Since the height of the financial crisis, UK equities have regained the 40% they lost at the height of the crisis – and plenty more too. Added to that, dividend paying equities enabled investors that kept hold of their investments to enjoy the benefit of the dramatic effects that compounding can have on a portfolio.
It is important to note that over most ten-year periods since records began, equity markets tend to grow. There is a cycle – they correct themselves every decade or so, and then they rise. Generally, over the long term, they grow.
So, having no exposure to equities within your investment strategy means you’re losing out on any potential growth. And the same can be said for other asset classes too.
Now, this is a rather crude example of how diversification can reduce the risk of big losses, but I hope you get my point. If you want a more thorough explanation, supported by historical analysis, of why you should diversify your investments, I’d suggest you take a look at Andrew Craig’s Plain English Finance website or invest in a copy of his book.
The VT PEF Global Multi-Asset Fund
For those of you that would like to take control of your investments but lack the time, or even the confidence, to take control of your investments, Andrew and his Plain English Finance team have launched their new VT PEF Global Multi-Asset Fund which puts into practice all of the methodology explained in ‘How to Own the World’.
Andrew explains “Not long after we published the first edition of my book in 2012, people started getting in touch to ask if I would be able to invest their money for them ‘like in your book’.
“As a result of that interest, we took the decision to set out on the long road to provide exactly that option in a fully-regulated, global multi-asset fund.”
The fund invests in 24 different assets from all over the world and uses simple trend following analysis on each of these assets every month to decide whether to continue to own it or switch into cash. Analysis suggests this method has a long track record of reducing potential losses in the crash years.
You can read the fund brochure to find out more about the interesting model that Andrew and his team will adopt with falling markets.
The VT PEF Global Multi-Asset Fund carries a minimum investment of £100 and will be available on all the major UK stockbrokers and investment platforms such as AJ Bell, 7IM, Hargreaves Lansdown, AXA, Standard Life, Fidelity, Barclays and TD Direct.
Andrew’s new fund could be a great option for investors that want a single fund to provide them with long-term exposure to the worlds financial markets in it’s various forms. It’s not going to be as cheap as managing it yourself with products like passive Exchange Traded Funds and their actively managed counterparts, although costs are certainly not prohibitive when compared to peers. I’m very much looking forward to seeing how the fund performs.