LOOK AT IT THIS WAY
What makes a great wine? Ask a wine drinker and they’ll say bouquet and drinkability. Ask a winemaker and they’ll doubtless mention grapes, soil, climate, timing of the harvest, fermentation, ageing, bottling and marketing — just to name a few inputs.
Investing is a bit like that. We all want to see great outcomes and savour those returns. But many don’t appreciate the importance of good process and attention to detail. In investment, that means asset allocation and diversification and a focus on risk and cost.
No vintage is the same
But the comparisons don’t end there. A winemaker knows every vintage is different. Some years will be better than others. Unseasonable weather can kill a good harvest. Patience is required. Equally, investors have to learn to accept there will be down markets on the way to their goal.
Tastes comes and go
Good winemakers also learn to diversify. Consumer tastes can change. In the 80s, everyone was drinking chardonnay, then sauvignon blanc took over. More recently, pinot has become the fashion. And eventually, the cycle swings back to chardonnay again.
Likewise, good investors don’t pin all their hopes one stock, sector or asset class. They mix them up because they know not every year is going to be a great vintage.
It’s all in the detail
Finally, just as great wines depend on attention to small details, so do great portfolios. A good winemaker will take care to cellar his wine in optimal conditions, at the right temperature and humidity with not too much light. A good investor learns to leave his portfolio alone, apart from disciplined and regular rebalancing.
Ultimately, though, just as wine is made for drinking, we invest with a goal in mind — to live the lives we want with the people we love. And aren’t those the sweetest returns of all?
Did you find this analogy helpful? Here are some more:
OUR STRATEGIC PARTNERS
Content such as this would not be possible without the support of our strategic partners, to whom we are very grateful.
We have three partners in the UK:
Bloomsbury Wealth, a London-based financial planning firm;
Sparrows Capital, which manages assets for family offices and institutions and also provides model portfolios to advice firms; and
OpenMoney, which offers access to financial advice and low-cost portfolios to ordinary investors.
We also have a strategic partner in Ireland:
PFP Financial Services, a financial planning firm in Dublin.
We are currently seeking strategic partnerships in North America and Australasia with firms that share our evidence-based and client-focused philosophy. If you’re interested in finding out more, do get in touch.
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