Investing is inherently interwoven with the fluctuations of markets, and bestows profound wisdom on the astute individuals who comprehend the sheer power of focusing on the long-term. When one encapsulates their financial strategy within a cocoon of patience, the dividends, both literally and metaphorically, can be bountiful. Legendary investor Warren Buffett, often revered as the Oracle of Omaha, persistently underscores the principle of embracing patience and possessing a long-term perspective in investing. His investment in The Coca-Cola Company, for instance, has remained stalwart since 1988, illustrating the lucrative nature of long-haul investing and compounding benefits.
Disciplined and diligent habits of saving consistently are paramount to achieving financial prosperity. It isn’t merely the act of investing that bears fruit, but the gradual, methodical allocation of resources that tends to multiply over extended periods. An illustrative model of this can be viewed through the lens of a systematic investment plan (SIP), which promulgates the practice of investing a fixed sum into a particular investment avenue at regular intervals, thereby mitigating the impact of market volatility and leveraging the power of compounding. When we view savings through this prism, it becomes a strategic endeavour rather than a mere financial act, inherently building a robust foundation for wealth creation.
Navigating through the tumultuous seas of the financial markets also demands an astute ability to stomach short-term volatility and noise. The markets are perennially subject to a myriad of influences, from political unrest to technological breakthroughs, all of which invariably invoke fluctuations and spurts of instability. A prominent example of surmounting such challenges can be derived from the tech bubble of the early 2000s. Those investors who maintained their composure, despite the apparent cataclysm, and held onto their investments in robust companies, witnessed an eventual rebound and substantial growth in the ensuing years.
The Baillie Gifford Worldwide Long Term Global Growth Investment Fund, is known for its forward-looking, long term focus, investment strategy. The fund managers often focus on identifying and investing in high-growth companies with the potential for sustained, above-average earnings growth. The fund typically invests in a concentrated portfolio of companies from around the world, often with a strong emphasis on innovative and transformative businesses.
The fund currently has a very balanced split across geographical regions and they are long term holders of companies/shares. The fund can suffer from short term volatility, as shown in the below chart, where in 2022 saw a nearly 50% drawdown in the fund. However, over the long term their proven track record has earned them 12% per annum for the past 5 years.
At InvestLife we like this approach. A long term outlook at future growth opportunities, and holding companies driving positive change that they believe are going to shape the future of the world, align to how we view long term investing. Their willingness to take a differentiated view, and tolerate volatility in exchange for long term gains means that the fund provides our model portfolio with a differing metric of performance. Whilst the fund still holds relatively quality stocks, it does look to the future and as such it can be difficult to pick quality companies that are as aligned to their innovative/futuristic views.
Stability, experience and commitment are features of the fund management team, whose investors spend the vast majority of their time finding and researching stocks. The five decision makers for the strategy of the fund are Mark Urquhart, John MacDougall, Michael Pye, Gemma Barkhuizen and Robert Wilson. Both Mark and John are partners in the firm and all five individuals have spent their entire investment careers at Baillie Gifford. The LTGG team is structured such that every investor, whether a decision-maker or an analyst, can contribute meaningfully to the generation of new ideas, stock research and stock discussions. We want to bring creativity and imagination to our research process and don’t believe that big groups making decisions by consensus are conducive to achieving this.
It is only over periods of at least five years that the competitive advantages and managerial excellence of companies becomes apparent. It is these characteristics that Baillie Gifford identifies and supports by taking a long term approach to investment, acting as owners of shares in companies on our clients’ behalf, rather than ‘renting’ them for the short term. Their return stability may not be attractive, but it does encourage a long term perspective in this most impatient of industries.
In an age where information cascades through our screens incessantly, our ability to sift through the noise and adhere to our long-term investment strategy can be discerned as a quintessential attribute for successful investing. The empirical evidence provided by historical data unambiguously advocates for a disciplined, patient, and long-term approach to investing as a conduit towards achieving sustainable financial success. This paradigm is not merely a financial strategy but a philosophy that elucidates the trajectory towards enduring prosperity and financial serenity.
In conclusion, I would like to leave you with this quote “It is possible to make money— and a great deal of money—in the stock market. But it can’t be done overnight or by haphazard buying and selling. The big profits go to the intelligent, careful and patient investor, not to the reckless and overeager speculator”, J Getty.
Contact us at InvestLife to learn more about how we can help you maintain your focus on the long term goals that you set.
