Chief Investment Officer

June 2022

I was recently involved in a discussion with other middle-aged males in Lyra and trying to garner their support to justify my buying a new, shinier (more expensive) bicycle.

Annoyingly, one of the cycling warriors swept all arguments aside saying simply, ‘If you don’t have it in your legs, you won’t find it in the bike.” The lesson was a brutal one: if you want to be a cyclist, you have to cycle. End. Of. Story.

This interaction gave me cause to reflect on the truths of human nature; it’s so much easier to throw money at the problem, to distract and obviate, than it is to change behaviour, to become more conscious: in this instance, to eat better, lose the muffin top, spend more time on the bike you already own…

And so came the question of where else this behaviour manifests? An immediate glaring example is our investing habits.

If I want to be an investor, then all I have to do is simply invest? Surely throwing money at that option would suffice.

Reality check: in 1934, Graham and Dodd defined investing as follows,

“An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”

In simpler terms, DON’T HUSTLE! Don’t hustle, think long-term. Hustling traps you in the pressure of succeeding for now. Investing with purpose shifts your gaze to the possibilities of the future.

So, if we unpack the criteria:

  • Thorough analysis – hot tips around the braai does not qualify as research. Do you buy a fridge like that, or do you call three suppliers and compare features and prices? How much time do you spend on research when upgrading your phone?
  • Safety of principal – while this may be considered passé by some, it certainly becomes fashionable again when people start to lose money.
  • An adequate return – be realistic with expectations. Terra/Luna offered an annual return in USD of 19%…if it seems too good to be true it probably is…RIP Terra/Luna
  • Investment vs speculation – this debate is an stimulating one, but according to Graham and Dodd, anything not promising a yield is speculative. Therefore, no sneakers, no tulips, no crypto!

For anyone who has built a house, this generally involves appointing an architect and a builder. Needless to say, tabs are kept on the building crew and we make sure that they follow the plan (and the budget). Changes cost patience, goodwill and money, particularly if they are the result of poor planning.

Investing is no different. Many of us don’t have the time, the skill or the insight required to manage a portfolio and so we appoint an advisor. Whether using an advisor or not, the same fundamentals apply:

  • Spend enough time and attention formulating a plan;
  • If the circumstances upon which the plan was made have not changed, don’t change the plan;
  • Keep tabs on your investments – open your statements, check the balances – are they doing as expected?;
  • Calibrate the relationship with your advisor and/or fund manager against your expectations – it might be them…but it might not be…it might be you… Check that what you are receiving is what you expected based on the label;
  • Stick to the plan – it’s easy to be side-tracked by an emotional reaction. (This article may inspire hope.)

Remember that the future has an ancient heart. In March 2020 we shared an article that explained why our multi asset funds were fully invested in cash at the time of that correction – not because we predicted COVID19 – we simply had concerns about the market…this current situation has been quite some time in coming in our view.

Our multi asset funds are still invested in cash…and again, the journey to here has not been comfortable for some of our investors; this emphasises the importance of understanding how a fund behaves in various conditions. Simply put, our philosophy and discipline dictate that, in the words of Lao Tzu,

“Do the difficult things while they are easy and do the great things while they are small. A journey of a thousand miles must begin with a single step”