Alan’s Blog August 2012

Everyone’s day is 24 hours!

Did anyone see Cherry Healey’s program on BBC3 on 19th July “Do we work and play too hard?” It was great to see how four different life situations gave you a lot to think about the ‘work-life’ balance.

I read a great book by David Scarlett last year: “The Soul Millionaire” which is one of my top recommendations for a good romantic and thought provoking read. In one small section of the book he introduced me to ‘Eagles’, ‘Roosters’, ‘Chickens’, and ‘Magpies’. This is great metaphorical language for thinking of how you use your time. You could do yourself a favour by reading the book but briefly Eagles are the things that you do that really matter, the things that if you are not careful get swamped by the less important; Roosters are the very important things that you must do in order to earn a living and to enjoy the friendship of those you love; Chickens are busy, busy, busy things that cluck and peck all day without getting you anywhere and without really doing much for you. They prevent you from having a satisfactory life and they should be controlled, avoided or eliminated; worst of all are Magpies that steal your time – so many people or things love to steal your time and rob you of your time and money.

Why have I introduced two apparently disparate things? Well I suppose because I was reflecting on my own activity over the last 6 or 12 months. I’ve spent a lot of time banning the Magpies and eliminating the Chickens while putting the Eagles at the forefront and ensuring the Roosters are well fed. However it seems odd that in order to create time to focus on the Roosters you must for a period of time give all of your time to the Chickens!

An example of this came to a conclusion in July when we completed a project where all client paperwork since the business started in 1990 was made available on line. We have had a no-paper policy for a few years, all historical and current paper has been scanned, shredded, and stored electronically but this moved up a notch when it was moved from local storage to a data centre in Harlesden London. This task took considerable time to organise, but now that it’s done, the time saving from a business perspective of having all client paperwork to hand immediately is amazing.

The next stage is I believe unique to Interface Financial Planning because the online access is not simply available to us: Every client can simply request their user name and password and view the paperwork that we hold on their file on a 24/7 basis. The data protection act allows clients access to their paperwork, but with the access that we provide we have gone one stage further and actively encourage clients to view their files. If you would like to see your documents and don’t already have your user name and password please ask.

Last month I discussed the seventh secret of the “The 7 Secrets of Money” which is a book that I strongly recommend: you can get your own copy from Amazon and for more information you could look at the authors’ website at This month I add some closing comments.

The 7 Secrets of Money: “Postscript”

I love the authors’ postscript title: “Keep calm when everyone else is panicking”
For the long term investor one thing is certain: there will be times when you seriously doubt your investment strategy. There will be rocky patches. For example in a balanced portfolio with 50% in fixed interest and cash and 50% in shares since January 1st 1990 you will have seen the following:

•    36% of the time your investment will have been falling
•    19% of the time your investment will have been recovering
•    45% of the time your investment will have been rising

Your worst downside experience would have begun in January 1973 and over 24 months you would have lost a total of 27% but your investments would have recovered just 3 months later. This shows how dangerous market timing is and how keeping your discipline is crucial to your long term success. The next-worst experience would have been from September 2000 for 29 months when you would have lost 18.1% and taken 22 months to recover.

If you had taken a much higher risk and invested entirely in shares you would have lost approximately 49% from January 1973 over 21 months, taking 14 months to recover, and you would have lost 46% from September 2000 over 29 months , taking 37 months to recover. This shows how asset allocation can reduce the risk.

Stay Firm:Emotionally coping with the downs is part and parcel of investing; enter this world with resolve and stay firm. History shows that the stock market has rewarded investors who can bear the risk of stocks and stay committed through various periods of performance. Just when things look really bad, very rapid turnarounds in market performance are the norm. The short-term risk is a necessary risk to take on if you are going to beat the biggest risk of all – inflation.

The Secret: The secret to successful investment is not to try to forecast the market – for you cannot beat the market in the long term – but instead to focus on the things that you can control; concentrate on costs, properly diversify your risk, structure your portfolio the right way, stay disciplined, rebalance and – as important as all of that – seek out good independent financial advice.

What is the catch, you may ask? There are two:

•    Embracing these theories involves ditching sacred cows and that can be very, very hard.
•    It is not sexy or instant. And in our culture many people often want sexy and instant.

If you are willing to deal with a way of looking at money that politely and scientifically question what might be your existing beliefs; if you are willing to embrace a style of investing that sees simplicity as a virtue; if you can invest money knowing for certain that you will lose money from time to time, but have confidence in the model and your adviser to deliver in the long term … then you can open the door to an investment experience that is vastly superior to what most private investors currently suffer.

7 Steps to investment success:

1    Enlist the help of an expert financial guide – a skilled, independent, fee-based adviser will keep you on  purpose during your financial journey, particularly when things get tough.
2    Understand your relationship with money. Recognise and control your natural behaviour biases, which can sabotage a successful investment experience
3    Be clear on your life plans and your short-, medium-, and long-term financial goals.
4    Think about your tolerance for risk and understand the risks around investment to ensure a smooth ride
5    Together with your financial adviser, create a robust financial plan to meet your goals, ensuring it is firmly grounded in the reality of your current financial situation
6    Design and build an intelligently constructed portfolio. By following a sensibly devised plan whereby you spread your assets across a number of appropriate investments and keep the proportions allocated to those various investments in balance.
7    Keep the discipline; understand your investments and the return drivers and be patient. Wait for your investments to deliver their long term expected return while making sure that you keep within your agreed asset allocation and the discipline of rebalancing.

And that is all that it takes to be a successful investor.

Next month I’m going to start my review of Ric Edelman’s “Rescue Your Money” which will follow the same theme from someone on the other side of the Atlantic. If you can’t wait until next month take a look at

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