DIY Investor Magazine
/
2015 Issue
26
The financial world would have you believe that
successfully controlling and running your own
investments requires the expertise of Warren Buffet, the
cunning of Nick Leeson and a tall skyscraper in the City
of London.
Well, in my view that is simply not true! A lot of the
personal finance industry is not set up help you to
become a DIY investor because their business models
are based around ‘advising’ you. This means that
your returns have been reduced in order for this to
happen. For me it has always been about answering
a simple question. Will I or an outsider have the most
interest in securing a well-financed retirement and an
inheritance for my descendents? There are no points for
answering this. At the end of the day, your savings and
investments are your baby and nobody else`s.
In Europe we live in a socially funded world, which
means that government cannot give to anybody,
anything that it does not first take from someone else.
Redistribution means that as a saver and a person of
means, whether you like it or not, they are going to be
coming to you. Today, we do not know what future tax
demands we are going to have to meet, just that they
are always going to be around the corner.
Douglas Chadwick,
founder and Chairman of Saltydog Investor offers
a personal view on investing and why he favours ‘momentum investing’.
WHY NOW IS THE TIME TO BECOME
A D.I.Y. MOMENTUM INVESTOR
I used to have an initial investment target of producing
an income that was greater than my wife and two
daughters could spend. I have now lifted this target
to include a further contribution towards the country`s
economy. In this environment your money simply has to
work hard and that means it must be advantageously
invested.
TYPES OF INVESTING
There are many different types of investing styles all of
which have their advocates and enthusiasts. For me
there are only three that merit attention.
There is ‘value investing’, there is ‘small company
investing’ and finally there is ‘momentum investing’
using funds. At Saltydog Investor we believe in
momentum investing - with the proviso that you must
have access to up-to-date, unbiased performance fund
numbers. It makes long term sense and lends itself
easily to the DIY investor.
Value investing is represented very clearly and ably
by its most famous advocate Warren Buffet, one of
the wealthiest men in the world. It means that you are
looking for good companies that are perhaps trading
in unloved sectors or those which are just simply
overlooked and undervalued. You buy their shares
cheaply and sell a long time in the future at a very
much higher price. At least that is what you hope.
There are many fund managers who specialise in this
approach.
To be successful, it requires scrutinisation of the
company`s balance sheet, sales plans and accounts.
Even so, having done all of this, due to unforeseen
circumstances, it can all still go horribly wrong. If you
are going down the route of value investing I think it is
worth remembering the expression ‘Man plans and God
laughs’. Warren Buffet`s big recent failure was buying
into Tesco and a couple of years later being forced to
write off nearly a billion pounds.
Small company investing is exactly what it says on the
tin. There are many funds that carry the title of “small
company” and you should look at the I.A. definitions
that put restrictions on where these fund managers can
and cannot invest. The theory is that companies start
small and gain value as they grow. That is fine and
dandy provided that you have selected the ones that
‘IF YOU ARE GOING DOWN THE ROUTE OF VALUE
INVESTING I THINK IT IS WORTH REMEMBERING THE
EXPRESSION ‘MAN PLANS AND GOD LAUGHS
