What you learn about investment on a golf tour

Earlier this year, I went on a golf trip to Spain for a few days with a bunch of guys of similar age: we’re all in our late forties / early fifties, although this did not prevent us from behaving as though we were still nineteen. It’s quite astonishing how you never forget the intricate, often arcane, rules of some drinking games, even at 3am, which, when combined with six rounds of golf in three and a half days, meant most of us were ready for a break when we returned home on day four.

I’ve known some of these blokes since university, that’s nearly thirty years, and, as our respective careers have moved along, occasionally stalled, changed or taken completely unexpected diversions, our paths have crossed often. Most of us are reaching the stage where, from a financial perspective, we’re intent on getting as much saved or invested as is possible over the next few years: there were few present who fancied working full time once they had turned sixty.

Since returning to various parts of the globe, post-Spain, several of us have decided to proceed with a suggestion mooted while on tour and establish an investment club, which suggests it wasn’t all fizz-buzz (or zoom-Schwartz-Figliano – one for the connoisseurs) once the sun went down.

For now, the club has two core objectives. First, one of our monthly investments must be deemed inherently risky; not outrageously so, but sufficient enough to offer the tantalising prospect of chunky returns. We can trade or sell these investments once they’ve reached a certain level, but have opted to install a stop-loss to prevent being completely wiped out.

To date, our other monthly investment has been in rock-solid defensive stocks such as Shell, Vodafone and GlaxoSmithKline. These are long-term holdings which, once they’re tucked away, will hopefully gather dust and continue to grow steadily rather than spectacularly, ticking along nicely with all dividends re-invested.

As most readers will have already concluded, there is a risk-spreading logic behind investing in two completely different types of equity, although our planned end result is the same, namely to fund future golf trips, possibly to more exotic locations than southern Spain.

On a very basic level, our longer-term plans highlight the importance of asset  allocation. According to an increasing weight of evidence, this is the single most important factor likely to determine performance. Before we started our portfolio, therefore, we made a point ofidentifying areas of economic activity most likely to grow over the long term.

There was little disagreement that China would continue to expand and establish itself as an economic powerhouse, although one of our party, who has worked in India for the past four years, persuaded everyone that here was another country destined to succeed. Exposure to both China and India were considered portfolio prerequisites.

Those of us with any remaining hair know that unless it’s artificially treated, it will remain grey, a factor which resulted in wholesale agreement on another area of investment: namely into companies that service Europe’s and north America’s greying population.

Not every investment suggestion was voted through on the nod, but by combining a mix of passive investments (defensive stocks) with active (risky ones), for the time being at least, we’ve allocated our assets to meet specific requirements.

As the year draws to a close, it’s the type of exercise investors should undertake as a matter of course, for planning ahead, not changing things retrospectively, can pay enormous dividends: who knows, it might even help your golf, though it’s not done anything for members of our investment club to date.  

posted on 13 December 2012 16:55 byPJS