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Investment Strategies

At Parker Chartered Accountants and Financial Advisors we take a planned and strategic approach to investment. Following sound investment principles our aim is to generate the maximum return for an agreed level of risk.

Before providing any investment advice to clients we undertake a detailed planning process which helps us understand their current personal wealth, their attitude to risk and their personal financial goals. With this knowledge we are able to provide bespoke solutions to meet their investment needs.

The Parker principles of investment

Having worked in personal financial planning for many years we’ve built up knowledge and experience which we share with clients in what we call the Parker Principles of Investment.

The markets do work
Security prices reflect available information and so are the best approximation of intrinsic value. Price changes are due to unanticipated future events, which is one reason for the apparent short-term “randomness” of returns.

Stock mispricing should be considered a rare condition that cannot be systematically exploited through fundamental research or market timing. Although prices are not always correct, markets are so competitive that it is unlikely any single investor can routinely profit at the expense of all other investors.

Risk and return are related
The more risk you take on by investing in equities the more return the market will pay you for holding shares rather than fixed interest securities.

The market return is the premium over the risk free rate owed to investors for investing in equities. Exposure to meaningful risk factors determines expected return. There is no free lunch—the only way to earn higher returns is to take more risk. Markets are drawn to a long-run state of equilibrium where risk and return are related.
Everyone’s risk profile is personal and the best way to assess your risk preference is by taking a psychometric risk profile test. If you fully understand risk and your own attitude to risk, the chance of success is dramatically increased.

Portfolio diversification is key
Diversification within a portfolio is essential in order to remove the many types of risk associated with holding equities. These include credit risk, inflation risk, and maturity risk. By holding a spread of investments all risk other than market risk can be removed. And over longer time periods even market risk disappears.

Our approach is towards global diversification. We believe this is best achieved by a disciplined, strategic approach to global asset allocation. Concentrating your investments in a single market adds risk with no additional expected return, whereas a globally diverse portfolio means you can take advantage of improved performance in the booming economies, whilst not feeling the full downside of those about to bust.

Asset allocation along size, value, and market exposure dimensions primarily determines the results of a broadly diversified portfolio.

Costs matter
If the long term market return is 8% most investors achieve half this. This is partly because investors behavior makes them buy when markets are rising and sell when they are falling.

It is also because management fees, trading commissions, market impact costs, bid/ask spreads, administrative expenses and sales commissions directly reduce net investment returns.

The combined effect of these costs can be difficult to compute and can consume a surprisingly high proportion of the gross investment returns offered by the capital markets. Our approach is to look at the overall returns that can be achieved, taking account of costs.

Get good financial advice
As Chartered Financial Planners we understand the importance of professional advice when making investment decisions.

Our goal is to help clients achieve a balanced portfolio of investments so that they can achieve their long term financial goals.

Part of our role is to help clients maintain investment discipline. Investors will not effectively capture market returns if they abandon their long-term strategy in response to recent events or predictions of the future. Most of the City (and the media in general) promotes a short-term perspective that is diametrically opposed to the principles of modern portfolio theory. Helping clients maintain discipline is a difficult but important challenge that can make or break their portfolio. This can only be achieved by explaining and applying sound investment principles.

For advice on investments contact Andy Parker, Chartered Financial Planner on 0121 704 1354 or email us here.

Parker Chartered Accountants and Financial Advisors is the trading name for PLW Advisors Ltd (Registered No. 10396831), and Parker Financial Planning LLP (Registered No. OC347027). Parker Financial Planning LLP is authorised and regulated by the Financial Conduct Authority. All companies are registered in England and Wales – registered office contact details here