Despite decades of evidence to the contrary, investment managers and commentators persist in holding a short term view of the market that’s unlikely to be in the best interests of ordinary investors, says boutique Aussie equities specialist, Hyperion Asset Management.
“The recent falls in the ASX are a case in point, with the extent of the interest and concern around short term movements indicating that some investors and commentators are missing the point,” said Tim Samway, Hyperion’s Managing Director.
“And the point is, with very few exceptions – such as professional traders or speculative investors – equities investing is a long term game. Treating it as anything else is one sure way to erode gains, which is the last thing that most Australians, who just want to build a long term, secure retirement, need.”
Mr Samway said that intensified focus on day-to-day stock movements can prevent investors from achieving their long term investment goals. He cautioned both investors and their advisers to make decisions about their holdings on the basis of quality, long term performance data rather than fluctuations which may seem significant on any given day but, over time, may be meaningless.
“The simple fact is that stocks cannot be expected just to rise and rise. The nature of the market is that they will rise and fall. The purpose of sound investing is to ensure that, over the long term, the rises outweigh the gains. Preferably significantly,” he added.
Mr Samway went on to say that the reasons for the current mood of short termism and market navel-gazing were probably many and varied – but that none of them was sufficient on the evidence to divert investors from a long term path.
“Whether it is the shorter news cycle, the increased sensitivity to market news since the GFC, a heightened sense of awareness about superannuation outcomes – or a combination of these factors, the noise that surrounds this kind of unhelpful and often ill-informed market “analysis” remains just that – noise,” said Mr Samway.
“Instead, investors who want a long term, secure retirement should be focusing on strategies that incorporate a robust investment process that will secure long term sustainable returns and preservation of capital. Ultimately this means investing in growing businesses with superior economics, at an attractive price.”
Mr Samway said that the key factors Hyperion looks for are a high return on equity, a proven track record of success, low gearing and organic, sustainable growth.
“What is frustrating about the current climate is that Hyperion’s focus on the long term is one with which most superior investors and commentators agree. So we thought it time to go on the record and call for some calmer, more informed discussion that may even add genuine value to the debate – and to client portfolios – which is surely what we are all here for.”
