Empowering clients to make informed investment decisions and to understand an investment process ultimately creates better clients, according to the founder of Montgomery Investment Management, Roger Montgomery.
In addition to offering a managed fund, Montgomery has developed a stock valuation tool called Skaffold, and has committed his investment ideas and philosophy to print in a book entitled Value.Able.
Montgomery has made Skaffold both accessible to individual investors and powerful in the way they can use it to identify potentially undervalued stocks. And he has adapted the traditional print format of Value.Able into a multi-media publication available as an iBook through the Apple iTunes store.
Twofold motivation
Montgomery says the purpose of writing the book was to ensure that he remained true to his investment approach and to make him “accountable to everyone who has read the book”.
Far from undermining the position of financial planners, Montgomery says it’s vital that any investment process be demystified as much as possible. He says investors who understand how their money is invested – and who, consequently, understand that their investments will not always perform well – are less likely to make rash decisions or cut and run when the going gets tough.
His motivation to inform investors is twofold.
“The first one is, I am passionate about educating investors anyway,” he says.
“And the second one is that I believe educated investors are the best clients to have. What I do not want is investors who do not understand what we’re doing. So, by teaching them what we do, nothing comes to them as a surprise.”
Power to the people
Montgomery says professionals should not try to fool themselves – or their clients – into believing that they can forecast share prices.
“Eventually, if you’re pretending that you can by any means – whether you’re complicating the investment process or you’re making secret some herb or spice – you’ll be found out, because you cannot predict share prices in the short run, or even in the medium run,” he says.
Montgomery’s share valuation tool is “popular with not only investors but also with financial advisers”.
“We’ve got banks that are using it, we’ve got broking firms who are using it and lots of financial planners are using it,” he says. “Again, what it does is it demystifies what we do and it puts the power of the process or approach into people’s hands.”
Have a go
“The question is often asked why we put our processes and our proprietary tool in the hands of other investors.
“Look at how successful Bunnings is in Australia. People don’t know how to build a fence, and it is much more economical to get someone in who builds fences to build your fence. Yet people go to Bunnings and they’ll buy the hammers and the saws and the posts and the palings, and build their own fence. It will fall over and they’ll end up having to get someone to do it anyway.
“I’m not suggesting that everyone who invests for themselves will be the fence that falls over. But they want to have a go themselves. And there’s a lifecycle. There’s a tolerance level for that. I say quite openly to investors that there’ll be a period of time where you’re interested in doing it yourself and then there’ll be a period of time where you’ll say, you know what, I don’t want to do this any more because I don’t want to be chained to my computer screen, and there’s actually other things that I want to do – spend time with the kids, and so forth.
“And if they’ve learned to invest using our approach, then again, maybe they’ll come back to us or somebody else who is a value investor.”
