|In Oscar Wilde’s Lady Windermere’s Fan, Lord Darlington famously describes a cynic as “a man who knows the price of everything, and the value of nothing”.|
I think this also serves as a description of the difference between a ‘trader’ and an ‘investor’, and this is in no way intended as an criticism of my trader friends.
A trader will seek opportunity in the short-term movements of stock prices, whilst being less concerned with the operating activities of the companies in question. An investor, by contrast, will look for the potential value in a business based upon its long-term operating prospects, expecting to share in its success over many years.
|Good fund managers should be investors, willing to bide their time and sometimes hold their nerve when the going gets tough, and their clients should understand and appreciate this.|
Similarly, a cynic in the world of finance may well be focused more on short-term performance and fees, rather than longer-term goals and objectives and a holistic plan. Both of the former are important, but they should not be the benchmark by which success is measured.
At George Shippam Financial Planning we strive to help our clients understand the importance of adopting a less ‘cynical’ approach. This ensures that there is a clear alignment of interests, and that expectations are set appropriately.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
Next week’s Garrulous Jay: ESG – We All Have A Stake In This.