This week’s Around The World (ATW) pulls back the curtains and lets you look behind the scenes as to how investment decisions are made and how they benefit you. The PDF attachment explains the science behind how We Invest Differently.
The foundational principles are straightforward, and reminds me a bit of Rock-Paper-Scissors. As we know, Rock beats Scissors, Paper beats Rock, Scissors beats Paper, but in the world of investing, historically small companies grow faster than large ones and bonds issued by companies have higher interest rates than bonds issued by governments. Of course, I will add the omnipresent disclaimer that past performance isn’t a guarantee of future results. No it’s not, but delivering a better investment experience is about maximizing the probability of outcome, and investing in a manner consistent with market results of the past century is our foundational approach to wealth management.
As summarized in the attached PDF, the 4 core drivers of returns are:
Market: Equity premium -stocks vs bonds
Company Size: Small Cap premium: -small vs large companies
Relative Price: Value premium -value vs growth companies
Profitability: Profitability premium -high vs low profitability companies
The PDF is a bit of a read, but well worth it. Understanding how your money is being managed is key to Knowing Your Money. And knowing it, it kept to peace of mind.
Look forward to speaking with you regarding how We Invest Differently and how it benefits you. And as always call me anytime.