Why a value investment should be your portfolio’s special ingredient
We have a firm belief in the primacy of value as an investment strategy. That belief, however, does not translate into blind faith in its powers- or a conviction that on its own the approach will be suitable for everyone.
For one thing, as we have discussed in articles such as Con air, there is no such thing as an investment strategy that outperforms all the time.
For another, there are risks associated with value with which not all investors will feel comfortable.
Whether that be because they are naturally risk-averse people, or because they are not in a position to tie up their money for the sort of timeframe that would afford a proper chance to make back any losses resulting from short-term market volatility.
Don't put all your eggs in one basket
In short then, we do not seriously argue that every investor should unquestioningly put all their eggs in a single – value-shaped – basket.
After all, as we argued in Uncertainty and risk, creating a portfolio from different types of investment – what is known as diversification – may be one of the more straightforward approaches to investing but it also a tacit acknowledgement nobody can ever predict what is going to happen.
What we would seriously argue, however, is that when you are thinking about creating a portfolio of investments, more than a century of history suggests a value-oriented approach really should be part of the mix. Past performance, of course, should not be considered a guide to the future.
Some value seasoning
To use food as an analogy, we remember reading somewhere that all innovation in cookery stems from attempts by humanity to make staple foods such as bread, rice and potatoes more palatable.
So, while the portfolio stodge of a bog-standard tracker fund, say, might be enough to provide you with a bog-standard retirement, what should serve to make it far more palatable is the special sauce of the extra returns value investing could offer over time.
Fund Manager, Equity Value
I joined Schroders in 2000 as an equity analyst with a focus on construction and building materials. In 2006, Nick Kirrage and I took over management of a fund that seeks to identify and exploit deeply out of favour investment opportunities. In 2010, Nick and I also took over management of the team's flagship UK value fund seeking to offer income and capital growth.
The views and opinions displayed are those of Nick Kirrage, Andrew Lyddon, Kevin Murphy, Andrew Williams, Andrew Evans, Simon Adler, Juan Torres Rodriguez, Liam Nunn, Vera German and Roberta Barr, members of the Schroder Global Value Equity Team (the Value Perspective Team), and other independent commentators where stated.
They do not necessarily represent views expressed or reflected in other Schroders' communications, strategies or funds. The Team has expressed its own views and opinions on this website and these may change.
This article is intended to be for information purposes only and it is not intended as promotional material in any respect. Reliance should not be placed on the views and information on the website when taking individual investment and/or strategic decisions. Nothing in this article should be construed as advice. The sectors/securities shown above are for illustrative purposes only and are not to be considered a recommendation to buy/sell.
Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.