• There were these three brothers ..…….

There were these three brothers ..…….

Those of our clients who have taken advantage of the Argent Investment Service will already know the care taken by our Investment Team to establish an appropriate Risk Profile and Asset Allocation for them. We believe that by doing this preparatory research we are better placed to:

• Achieve growth in line with expectations.
• Control volatility especially when markets are in decline.

- not forgetting that individual investments are also being monitored to ensure they continue to perform to Argent’s established criteria. To cut a long story short – to achieve the maximum return for the minimum risk within the fund’s sector.

We have recently reviewed the pension portfolios of three brothers each with substantial funds but with different investment expectations and retirement objectives. In this Case Study we would like to demonstrate how their portfolios were constructed and how their funds have performed.

Brother A: - the youngest of the three – in his early 40’s. Agreed a "moderate" portfolio where a moderate level of volatility and therefore loss is acceptable in the short term in exchange for the possibility of higher returns and real growth in excess of the level of inflation in the longer term. In the current climate a satisfactory rate of annual return is 2% above the "risk free" return of 4.5% - total 6.5% pa.

As he still has many years before his stated pension age 60 we agreed that more of his fund should be invested in equities for longer term growth – despite potentially greater volatility. When reviewed in November 2006 his fund had achieved growth of 7.7% in the previous 6 month period (which included a short period of market decline during May and June).

Brother B: - the eldest of the three – in his mid 50’s and much closer to his anticipated pension age of 60. Nevertheless he had also selected a "moderate" portfolio. Our recommendation was to reduce potential volatility by reducing investment in UK equities by 5% and increasing his Property content by 5%. The trade-off of course was that his fund would not be able to take full advantage of any equity forward movement when compared to his younger brother’s fund.

And so it proved. When his fund was reviewed in November it had achieved growth of 6.4% in the previous 6 month period.

Brother C: the middle brother in his later 40’s. Temperamentally a more adventurous investor than his brothers, he selected a "speculative" portfolio and accepted a higher level of volatility in return for potentially greater gains. In the current climate a satisfactory annual rate of return is 3% above the "risk free" return – total 7.5% pa.

When reviewed in November his fund had achieved growth of 8.4% in the previous 6 month period.

Conclusion.

The messages of this Case Study are clear:

• Successful investment is very much a two-way process that involves the investor as much as the investment manager.
• Argent will only create a portfolio after the expectations, the requirements and the likes and dislikes of the investor have been taken into account.
• "You pays your money and you makes your choice." In other words if you choose a "speculative" portfolio – expect volatility. If you choose a "cautious" portfolio don’t be surprised if your returns are lower than portfolios with more adventurous investments.

It should be noted that the returns achieved by each portfolio is net of all costs and charges.