Investment Beliefs

MCG Wealth Management's investment beliefs help govern the way in which we manage client portfolios. These beliefs include:

  • Risk is more predictable and manageable than return. Consequently, risk management should be the key consideration when constructing portfolios
  • Investor's rational decision-making capabilities typically weaken as portfolio losses greater than they expected or can tolerate start to accumulate. Consequently, although risk is multidimensional, the primary risk to be considered is material loss of capital.
  • Asset valuations drive expected returns over the long term, but far less so over the short-medium term where sentiment can dominate. Consequently, returns are more predictable over the long term horizons than over the shorter horizons.
  • Single security investments can have very high expected returns, especially in the less efficient parts of the capital markets. Capturing them requires a high degree of skill and an acceptance of permanent loss of capital. consequently, investments should primarily be made through specialist investment managers and low cost index funds.
  • There is useful information in past returns, risks and correlations. However, history is an imperfect predictor of the future because asset classes evolve over time. Consequently, portfolios should be constructed on a forward looking basis, not through the "rear view mirror".
  • Risk-adjusted returns can be improved through diversification across assets with varied correlations. Consequently, a portfolio with investments in alternative assets can expect to achieve superior risk-adjusted returns, as compared to a portfolio which only invests in traditional assets classes.
  • A home bias to domestic assets is likely to limit returns, create unnecessary risks and is not supported by any investment rationale. Consequently, portfolios should have a bias toward global assets.