September 13, 2022
Robin Powell

Investment tips from an industry insider

Robin Powell
David Pitt-Watson – London Business School

RP: David Pitt-Watson is a fund industry insider. He’s worked in asset management for many years, and it’s made him question the wisdom of using active fund managers at all. A Fellow at London Business School, he’s now campaigning for greater transparency around fees and charges.

I’ve been to meet him and started by asking him the for the single most important piece of advice he’d give to ordinary investors.

D P-W: Just ask the question, keep asking the question. If one’s thinking about evidence-based investing, we know there are certain things which are likely to work: one is that you’ve got a low fee, and the other is that you’ve got good governance – both of your fund, and in terms of your fund thinking about the governance of the things that it’s investing in.

RP: David Pitt-Watson is particularly distrustful of complexity. Generally speaking, the more complex a product or strategy is, the more expensive it is — and that usually means lower returns in the long term.

D P-W: Keep it simple, keep it low cost, know what you’re doing. Think as well about: what am i investing for? So I run and am chair in an endowment, it’s a permanent endowment of a charity – 350 million pounds. I’m thinking about: how is it that I can have a real stream of income, most of it in pounds, that’s going to go out into the infinite future? Once I’ve decided that, the rest is comparatively straightforward. It’s thinking about: what do you need that investment for?

RP: Another important piece of advice is to resist the temptation to adjust your portfolio ahead of an important event — a referendum or election for example. It’s usually counter-productive.

D P-W: I don’t know more about the US election than anybody else knows. If I want a real stream of income that’s diversified for the long term, equities are quite a good thing to be invested in. You take a risk coming out, and you take a risk going in, that you know better than anybody else. For me, and I’m quite a successful investor, betting on the US election would absolutely be a dice throw, and throwing that dice will cost me several per cent, of which I’ll only know about a very small part of it. All the rest will be in transaction costs, so again: start with fundamentals, stick with the fundamentals, and you’re likely to do an awful lot better than people that are trying to switch in and out all the time.

Should stock investors tactically rotate between different industries to chase trends?

We’re often hearing in the media about emerging industries that seem to offer exciting opportunities for investors. Right now, for instance, there’s plenty of discussion around driverless cars and 3D printing.

September 22, 2022