How our Managed portfolios drive performance

by InvestEngine

Our Managed portfolios are overseen by a team of experienced investment professionals, who monitor markets daily to ensure that our clients’ portfolios are performing in line with their expectations.

So, what do investors get for their money? 

A truly long-term approach

One of the most important tenets of our approach to investing is our long-term perspective. When a lot of people think about investment managers, they imagine regular trading, an approach that looks to time the market and an attempt to profit from market imperfections.

This is not the goal of long-term investing. As we’ll explain, consistently timing the market is difficult or even impossible, often leading to investors actually losing out on returns. Instead, we aim for sound, smart investing with empirical academic evidence that gives investors’ cash the best chance to grow steadily over the long-term. 

Source: Bloomberg. Returns are for the MSCI World TR in GBP.

The chart above demonstrates the impact of taking a long-term approach. There has never been a 17-year period in history that has failed to see investors double their money on investments in the global stock market. 

Over a 20-year period, half those that held their investments consistently saw a 5x return on their initial investment. Of course, past performance is not a reliable indicator of future returns, but this chart illustrates how effective staying invested for the long run can be. 

Making the most of ETFs

Exchange-traded funds (ETFs) are an investment type that comes with a number of benefits. Before we get into what they are, let’s just lay out exactly what an ETF is and what one is made up of. 

Put simply, an ETF is a type of investment fund that trades on the exchange like a stock. ETFs can be made up of all different types of investments, from commodities to bonds to stocks and they provide access to a wide range of markets. Basically, when you buy an ETF, you’re usually not buying shares in just one company; you’re often buying hundreds.

There are a few key benefits of using ETFs. Firstly, they’re an easy route to diversification. ETFs can contain hundreds and even thousands of individual stocks, so your investment is spread, which is great for risk management. 

Secondly, they’re low-cost. ETFs have some of the lowest associated costs out there, so you can build a robust, diversified portfolio without giving too much of your return to fees. Which over time, can eat away at your investment performance significantly. 

ETFs are also transparent by nature. On our platform, for example, it’s easy to see a full breakdown of the holdings in your portfolio, whether it’s the geographies and industries you’re invested in or the individual companies. Where other asset types can sometimes be opaque, ETFs are easy to read. 

The behaviour gap 

Put simply, the investor gap is the difference between the total returns of an index or fund vs. the returns investors get as they buy and sell (i.e. trying to buy low and sell high). What this means is, more often than not, staying invested means higher returns. 

The gap between the two is known as the ‘behaviour gap’. It shows that investors actually end up reducing their returns by trying to ‘time the market’. It’s difficult to do and very easy to get wrong. 

Source: Morningstar’s annual ‘Mind the Gap’ study

This is what our investment management team tries to avoid. Whether it’s narrative bias (falling in love with a stock’s story), loss aversion (being reluctant to sell at a loss) or overconfidence bias (being unwilling to admit when an investment thesis simply hasn’t worked), these are all common things that investors habitually get wrong. 

We’ve designed our investment process to minimise the effects of these biases. Instead, we try to use a systematic, rules-based approach based on decades of peer reviewed academic evidence. Taking the emotion out of investing and focusing on consistency can lead to better returns in the long run. 

So, if you want your investments taken care of from start to finish, consider an InvestEngine Managed portfolio for your investments. 

Important information

Capital at risk. The value of your portfolio with InvestEngine can go down as well as up and you may get back less than you invest. ETF costs also apply.

This communication is provided for general information only and should not be construed as advice. If in doubt you may wish to consult a professional adviser for guidance.

Tax treatment depends on personal circumstances and is subject to change, and past performance is not a reliable indicator of future returns.

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