Click here to see fund chart [pdf] 0.8mb
Liontrust Special Situations Fund invests in a concentrated portfolio of UK companies from throughout the UK stock market, aiming for capital growth in excess of the FTSE All-Share Index over rolling three year periods.
The Fund is managed by Anthony Cross and Julian Fosh in accordance with a proprietary, tried and tested investment process.
He and Fosh monitor about 250 stocks that they like. Of these, about 50 are in the portfolio at any one time. One rule for inclusion is that firms must operate successfully in sectors where it is hard for rivals to muscle in. They must also have low debt and robust cash flows, with turnover usually from regular work.
This worked well in the run-up to the financial crisis, as it meant the portfolio had little or no exposure to the debts cranked up by banks and other property-linked businesses.
Cross says the methodology will prove itself again in markets that 'feel fragile' and where 'tensions are mounting'.
Fund of the Month (BlackRock Gold Fund - JULY, AUGUST & SEPTEMBER 2011) [pdf] 0.8mb
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Thirty-eight years later, he shared a Nobel Prize with Merton Miller and William Sharp for what has become a broad theory for portfolio selection.
Prior to Markowitz's work, investors focused on assessing the risks and rewards of individual securities in constructing their portfolios. Standard investment advice was to identify those securities that offered the best opportunities for gain with the least risk and then construct a portfolio from these. Following this advice, an investor might conclude that railroad stocks all offered good risk-reward characteristics and compile a portfolio entirely from these. Intuitively, this would be foolish. Markowitz formalized this intuition. Detailing a mathematics of diversification he proposed that investors focus on selecting portfolios based on their overall risk-reward characteristics instead of merely compiling portfolios from securities that each individually have attractive risk-reward characteristics. In a nutshell, inventors should select portfolios not individual securities.
If we treat single-period returns for various securities as random variables, we can assign them expected values, standard deviations and correlations. Based on these, we can calculate the expected return and volatility of any portfolio constructed with those securities. We may treat volatility and expected return as proxy's for risk and reward. Out of the entire universe of possible portfolios, certain ones will optimally balance risk and reward. These comprise what Markowitz called an efficient frontier of portfolios. An investor should select a portfolio that lies on the efficient frontier.
“There is scarcely anything in the world that some man cannot make a little worse and sell a little more cheaply. The person who buys on price alone is this man’s lawful prey.”
John Ruskin (if you buy the cheapest product then you are likely to be taken advantage of, focus on quality not price and you will get value for your money).
"The stock market is filled with individuals who know the price of everything, but the value of nothing." - Phillip Fisher
A testament to the fact that investing without an education and research will ultimately lead to regrettable investment decisions. Research is much more than just listening to popular opinion.
"How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case." - Robert G. Allen
Though investing in a savings account is a sure bet, your gains will be minimal given the extremely low interest rates. But don't forgo one completely. A savings account is a reliable place for an emergency fund, whereas a market investment is not.
"Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas." - Paul Samuelson
If you think investing is gambling, you're doing it wrong. The work involved requires planning and patience. However, the gains you see over time are indeed exciting!
"You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready, you won't do well in the markets." - Peter Lynch
When hit with recessions or declines, you must stay the course. Economies are cyclical, and the markets have shown that they will recover. Make sure you are a part of those recoveries!