Risks
Any investment involves an element of risk. By adopting a disciplined, long term value investing methodology however, we aim to reduce risk wherever possible.
The particular risks you should be aware of when considering an investment in the Bellmont Premium Portfolio include:
Systemic Risk
The share market is inherently volatile, and share prices may be subject to substantial and at times prolonged declines. Whilst the strategy we employ involves a systemic process of risk minimisation, no guarantees can be given. We do believe though that by adhering to a patient, disciplined, value based investment methodology, and maintaining a long term investment horizon, we are able to minimise risks for our portfolio clients.
Stock Specific Risk
Our investment objective is to maximise the net returns on your portfolio over the long term. We seek to invest in a limited number (usually less than 15) of businesses that we believe offer the most attractive economic prospects, based on our restrictive criteria. Accordingly, given the focused nature of the investments we will be holding, your portfolio is not likely to track the movement of the underlying index exactly, and at times is likely to under-perform. Yet it is this de-coupling from the index that also gives us the potential to outperform over the medium to long term, by investing only in those businesses that display outstanding potential, and are available at a discount to their intrinsic value.
Price Risk
Contrary to popular wisdom, we challenge the notion that investments in large capitalisation ‘blue chip’ shares are always a safe option, regardless of their price. Whilst the businesses underlying such shares might be stable, the level of risk for the investor is always a function of the price paid to acquire a partial ownership of that business. Investment in almost any business can represent a low risk proposition if the price is low enough; conversely, investment in any business can be risky if the price is too high. We therefore seek not to blindly invest in the largest companies in the market, but instead critically question the intrinsic value of all potential investments, and invest only when we believe that the value presented is compelling.
Focus Risk
Traditional investment theory recommends diversifying broadly across an investment portfolio, in order to reduce the risk that any single investment can impact too heavily on the overall returns. Unfortunately, such an approach also serves to reduce the opportunity for outperformance of the portfolio and too often sees investors diversify their way to mediocrity. By guaranteeing that they may do no worse than the average, they also ensure that they can do no better. The Bellmont Premium Portfolio on the other hand is a focused portfolio, with investments made in a select number of companies that we believe display exceptional prospects, and that we can purchase at an attractive price. We choose to put all our eggs in one basket – and watch that basket!