paulthérond.com

I have been read­ing the auto­bi­og­ra­phy of Richard Bran­son, which has truly been a fas­ci­nat­ing read to see every­thing that he has been through per­son­ally and pro­fes­sion­ally. It was also incred­i­ble to see the huge range of busi­nesses he has been involved in and where he men­tions that his phi­los­o­phy for busi­ness struc­ture is not to have one large com­pany but  rather 200 even 300 smaller self man­aged units. I can quite believe there is that many Com­pa­nies in the Vir­gin group, but the actual rea­son for this post had to do with one of these com­pa­nies which was Vir­gin Direct a finan­cial invest­ment company.

On page 499 he talks about the secret of all invest­ment fund man­agers and I was pleas­antly sur­prised to see that he totally agrees with some­thing I have long held to be true about the whole invest­ment indus­try. It really is quite a sim­ple fact…

No fund man­ager has ever con­sis­tently beaten the stock mar­ket aver­age index, so why not just invest in the index!

I totally agree Mr. Branson!

Why pay these huge fees to these fund man­agers who go on about all their amaz­ing soft­ware and analy­sis into invest­ing into com­pa­nies when they can never beat the aver­age of all the com­pa­nies in the stock mar­ket. Sim­ply invest in the index (aver­age of all com­pa­nies listed) which his­tor­i­cally has increased at about 12% per annum over the last 75 years. (Nat­u­rally this % fig­ure dif­fers from stock exchange to stock exchange but it will gen­er­ally be in this vicin­ity on average.)

So with this sim­ple fact in mind, Mr. Bran­son built up a very suc­cess­ful busi­ness in the UK help­ing peo­ple to invest afford­ably into the index. How­ever I would like to reit­er­ate that if you are look­ing at invest­ing on the stock mar­ket it is imper­a­tive that you have exchange tracked funds (index invest­ing) as a pri­mary com­po­nent of your invest­ment philosophy.

How­ever I am not say­ing that you must not invest in any other promis­ing com­pa­nies but if you do, it should be done with money that you are will­ing to lose. This is what I would call your cow­boy account and really should not account for more than 10% of your entire invest­ment funds avail­able. When it comes to invest­ment it really is wise to remem­ber the story of the tor­toise and the hare. Slow and steady wins the day every day!

I would like to see some com­ments on this post specif­i­cally regard­ing the var­i­ous index based invest­ments prod­ucts avail­able from all of our var­i­ous read­ers around the world. Feel free to comment below.

Tweet This Post