Our Business Philosophy
You are asking Fundamental Tracker Investment Management to manage your money for you. This is an onerous and responsible task and we imagine that you would like to know something about us, how we work and what drives us.
A shared identity and a common goal with the investor
Our business philosophy is based around a handful of very simple ideas. The most important of these is that the only way our business will thrive is if our clients thrive. Our first priority is to give you, the client, the best service we can offer at the lowest price we can. That might sound banal but many of us have had dealings with companies where the business philosophy is very different and the emphasis has been on extracting the maximum from each and every client. Our aim is to ensure that every customer feels good about us, stays with us and tells other people. We share a common goal with our customers.
Low cost, simple solutions are usually the most effective
Our second principle is not unique to us but one that we too often forget. Simple is best. We are not trying to demonstrate how clever our processes are or trying to make things more complex for any reason. Our view is that the simple solution is usually the best because there is less chance of it going wrong and it will probably be cheaper.
A brutally clear understanding of what we know and what we don’t
Our third principle is that we know our limitations. We are not promising to change the world of investing because we don’t think we can do that. The stock market is a brutally efficient machine and there are a vast number of people and a lot of computing power that are devoted to making money out of it. All we are endeavouring to do is to secure good returns from the shares in a way that minimises risk. To paraphrase Donald Rumsfeld we know what we know, and we are very aware of what we don’t know and we won’t try and pretend that we do. By aiming to secure the returns of the market over a long time we hope that what we don’t know we don’t know will, on balance, be more positive than negative. All the evidence from long term analysis is that investing is a long term business and we think our investment process has the best chance of locking in the returns that stock markets have been shown to deliver over time by taking the risk of the market as a whole. We don’t think we can second guess where oil prices, currencies, interest rates and technologies are going. All we know is that investing in equities over long periods of time, ten years or more, gives better returns than sitting on cash or bonds.
A thorough understanding of risk and the rewards that are appropriate to the risks incurred.
Investing is a concept that many people find daunting. They are worried about losing their money and just as worried about not making enough. Lending money to a bank which lends it to someone else is something most people are familiar with. However, the concept of investing, when you become a part owner of something, is not such a common concept. In essence though, buying a share in a company is the same principle as buying a house. It is an asset that has a value and, over time, that value tends to rise although there are periods when it might fall. To avoid the risk associated with just one company collective funds, like this one, invest in lots of companies. In fact there are about 700 companies listed on the London Stock Exchange and if you invested in every one you would have the lowest investment risk that was possible to get in shares. In practice most active funds only invest in about 100 shares in order to get better returns than the market. Some do and some don’t. Tracker funds that do invest across the market will give you the return of the market at the lowest possible risk, but your net return will be less because of fees. Our concept in the Munro fund is to reduce the risk as much as possible by holding every share in the FTSE 350 that pays a dividend, or is forecast to. By holding all these shares we are taking lots of little risks instead of a few big ones. That means our potential returns might be lower than some more aggressive funds but, relative to the risks we are taking, the returns will outweigh the risk. In technical language this is called having a positive information ratio. In plain English it means we want to get a return that is more than the risk we incur.
Growth through volume not price
Finally, we think that the mass market is where success lies. Our business is not aimed at rich individuals looking for a bespoke service. It is aimed at the ordinary person who, for whatever reason, is fortunate enough to be able to put some money aside for ten years or more and wants to get the returns available from the stock market but without taking undue risk. That means we want to make the business and the process simple, durable, transparent and accessible to as many people as possible. And the Internet provides us with the mechanism to do that.