Whiskey & Water

For many years, we have used a whiskey/water metaphor to explain the elements of an investment portfolio.

Whiskey is the “growth” element and Water the “defensive”.

In our portfolios the Whiskey part is comprised of part ownership of 1,000s of global Companies (Developed and Emerging Markets). This captures human ingenuity on a global level. Some of these companies will fail, some will succeed but without knowledge of the future (if so, we would have recommended buying video conferencing companies and selling cruise companies back in January) we recommend buying the haystack and not searching for the needle.

The Water element is very different and involves lending money to 1,000s of Companies and Governments around the world. These “bonds” are high quality and of short duration and they aim to provide the defense when equity values fall.

Some people drink neat whiskey, others are teetotal with others somewhere in between.

Our Investment portfolios are a blend of these elements with the blend ideally determined by a combination of the investor’s

  • Attitude to risk
  • Capacity for loss
  • Need for risk

For example, someone may have a high attitude to risk, but if the money they are thinking of investing is needed in the short term for a dream holiday then they have a low capacity for loss and a mainly water portfolio might be suitable.

Consider a retired couple with pension income comfortably covering their lifestyle needs. Their need for risk would likely be low, but if they have a high attitude to risk and want to preserve the purchasing power of their investments for their children they might consider a more whiskey based portfolio.

There is no “one size fits all”.

Whatever the “blend” our Investment Philosophy remains the same:

  1. Keep diversification high
  2. Avoid trying to outperform the market through timing and selection
  3. Keep costs low
  4. Rebalance when necessary (sell what has gone up and buy what has gone down, and vice versa)
  5. Maintain long term perspective

Feel free to call us to discuss your personal financial needs.

Kind regards

Blackdown Financial

This article represents the opinion of W&T Ltd trading as Blackdown financial only and is intended as information only. The content of this article should not be construed as advice or recommendation.

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Coronavirus (COVID-19)

BUSINESS AS USUAL

Blackdown Financial update – 11th May 2020

Based on ongoing government advice, we at Blackdown Financial continue to work remotely for the present.

We continue to offer all clients a full and seamless financial and mortgage service.

Video conferencing has replaced all face to face meetings, which has proven to be a successful and safe alternative means of communication.

We welcome all new enquiries on a free of charge no obligation initial meeting.

Please feel free to contact us on our main number 01823 321616 or email enquiries@blackdownfinancial.co.uk to discuss your financial or mortgage needs.