Our 14 Investment Beliefs & Philosophies

 

With decades of academic and practitioner research, as well as extensive live portfolio management experience, SciVest has developed a comprehensive set of 14 investment principles to manage our clients' portfolios. 
Number 1
#1. Long-Term Compounding

Compounding portfolio returns over extended periods of time is the key to building substantial future wealth. The longer the duration and the greater the return after expenses, the more wealth that is accumulated. This is just math.
Number 2
#2. Avoid Excessive Risk

Excessive levels of risk, or return volatility, reduce long-term compounded returns, which in turn diminishes future wealth. This is just math. Thus, it is essential to control portfolio volatility to enhance long-term wealth.
Number 3
#3. Diversification

Portfolio diversification is by far the most important risk management and mitigation tool available for investors to avoid excessive portfolio volatility/risk. Moreover, effective portfolio diversification can be achieved at almost no cost. Thus, portfolio diversification is essential to maximize long-term investment success.
Number 4
#4. Market Efficiency

In the short to medium-term, many securities and even entire markets may not reflect fundamental fair value, sometimes diverging significantly from it. This suggests that financial markets are not "efficient" in the short to medium-term. However, over the long-term, the value of securities generally re-align with their fundamental fair value, indicating that financial markets become "efficient" in the long-term.
Number 5
#5. Value Investing

The best approach for achieving long-term superior performance is to allocate more capital to assets that are undervalued (those priced below their fundamental fair value) and allocate less capital to assets that are overvalued (those priced above their fundamental fair value).
Number 6
#6. Markets are Hard to Beat

Overall, it is incredibly difficult to consistently outperform financial markets on an after-cost, risk-adjusted basis across any time horizon—be it short, medium, or long-term. However, long-term outperformance is quite possible if investors can withstand short to medium-term challenges and remain focused on long-term objectives.
Number 7
#7. Minimize Investment Costs

Academic studies demonstrate that the magnitude of investment management fees and expenses is the most significant and reliable predictor of long-term relative investment performance. As a result, investment management fees and expenses must be carefully monitored, managed, and minimized to ensure the best long-term performance outcome.
Number 8
#8. Strategic Asset Allocation

The long-term strategic asset allocation (also known as asset class mix) decision is the most important factor in determining investment portfolio return and risk in the long-term. This decision involves determining the appropriate distribution of asset classes across various categories such as equities, fixed income, and alternative investments, tailored to align with the investor's financial goals, risk tolerance, and investment horizon.
Number 9
#9. Avoid Market Timing

Engaging in short-term market timing, also known as tactical asset allocation, is an expensive, challenging, and risky endeavor that is unlikely to provide consistent long-term benefits. When driven by emotions like fear and greed, market timing tends to significantly harm long-term compounded portfolio returns and consequently future wealth.
Number 10
#10. Investment Strategy Mix

After establishing a long-term strategic asset allocation, choosing a mix of investment styles and strategies—such as value, growth, dividends, low-volatility, and momentum—becomes the next most important factor influencing the return and risk of an investment portfolio over time. This involves tilting the portfolio towards characteristics (e.g., value, growth, dividends, low risk, yield, etc.) that align with the investor's preferences, financial goals and risk tolerance.
Number 11
#11. Long-Term Proven Strategies

The effectiveness of all proven, theoretically sound investment styles and strategies can fluctuate considerably in the short to medium-term, as they may gain or lose favour in the market. However, this does not imply that their long-term effectiveness is compromised. The key to achieving long-term investment success lies in the unemotional, rational, disciplined, and consistent application of these proven, theoretically sound strategies.
Number 12
#12. Regular Portfolio Rebalancing

Regular portfolio rebalancing helps to maintain an appropriate level of portfolio risk and may also enhance long-term portfolio returns. This often involves selling high-performing assets and buying underperforming ones, which can lead to buying low and selling high over time. Regular portfolio rebalancing ensures that the portfolio remains aligned with the investor's strategic asset allocation and investment strategy mix plan, ultimately supporting the pursuit of long-term financial success.
Number 13
#13. Inflation is an Enemy

Over the long-term, inflation poses a significant challenge for investors who rely on their investment portfolio and its income to cover their living expenses in retirement. It erodes the purchasing power of both the income generated and the overall portfolio value. Thus, investors who depend on their portfolio must adopt investment strategies that ensure their capital and income grow at a pace that matches or exceeds inflation. This necessarily biases portfolios away from conventional 'fixed' income investments.
Number 14
#14. Long-Term and Unemotional

Overall, the vast majority of investors are too emotional, too myopic, and too focused on the short-term. Acting on these common human instincts almost always damage long-term compound returns and wealth accumulation, and thus must be resisted and avoided. Long-term, unemotional application of theoretically sound and proven investment strategies and programs are the key to long-term wealth maximization.