Evidence Based Investing – Drowning out the Noise!!

In this blog I want to give you a quick overview of our investment beliefs at Oliver Asset Management, namely Evidence Based Investing.

Who are evidence based investors?

You may well have heard us mention Dimensional Fund Advisers in the past, but probably will not have seen them mentioned anywhere else.

They are the worlds 8th largest fund management company.  They don’t advertise (helping to keep costs low) and they manage and offer research exclusively to institutional investors and a select group of fee based advisers (including us at Oliver Asset Management).

What is evidence based investing?

Evidence based investing is based on a belief in the efficiency of the markets, and that the market is an effective information-processing machine.

Rather than attempting to predict the future or outguess others, information is drawn about expected returns from the market itself—using the collective knowledge of its millions of buyers and sellers as they set prices of shares.

By trusting markets to do what they do best—namely drive information into prices—Dimensional Fund Adviser’s time can be freed up to where they believe they have an advantage,  which is how they interpret their research. They take a less subjective, more systematic approach to investing—an approach they can implement consistently, and investors can understand and stick with, even when the markets seem challenging.

How do we use evidence based investing?

By using Dimensional research principals in conjunction with our investment partners, we are able to utilise low cost globally diversified portfolio’s with strong track records.

We stick to our principals in helping to educate and drown out the external noise from fund houses who claim to have the next big idea.  This in turn frees up our time to focus on what brings you value, like planning out and visualising your future, using our sophisticated cash flow modelling software.

Why use evidence based investing?

The reasons we believe in evidence based investing are numerous, and too long to fully implement into this blog, but in short….

Evidence tells us that trying to outguess and trying to time the market does not work in the long term, and selecting funds based on past performance is extremely unlikely to continually succeed.

Daily news sells on fear which can in turn challenge your investment discipline.  For example fear of a market crash, or fear of missing out on the next big idea.

By avoiding market timing and chasing the next expensive “star” fund manager, diversifying globally, taking control of costs and turnover, and tuning out the noise we can focus together on actions that will add value to your financial plan.

For more information please follow the link:


Where can you access evidence based investing?

Get in touch, or pop into our office for a coffee and we can chat through our thoughts with you.


Jonathan Beaton


EU Referendum – What now?

Brexit – What does it mean for my investments?

Following last week’s EU Referendum vote, there is a high level of uncertainty over what this will mean for the country on many levels.

To attempt to calm market fears, there have been statements made from the Governor of the Bank of England, Mark Carney and this morning from George Osbourne.

At this time there is no clear understanding what leaving the EU will mean for investing in short term, but I believe that the long term nature of our investment philosophy and approach would recommend that although these are uncharted waters, staying in your investment seat at this time is the correct approach.

I work closely with Dimensional Fund Advisers and I share an extract from their newsletter which
better puts in to context our current situation:

“Dimensional has nearly 35 years of experience managing portfolios, including during periods of uncertainty and heightened volatility. We monitor market events—including their impact on trading and trade settlement—very closely and consider the implications of new information as it comes to light. We are paying close attention to market mechanisms and they appear to be functioning well. Our investment philosophy and process have withstood many trying times and we remain committed.

We urge caution in allowing market movements to impact long-term asset allocation. Long-term investors recognize that risks and uncertainty are ever present in markets. A drop in prices is generally due to lower expectations of cash flows, higher discount rates, or both. In some cases, a drop is also due to investors demanding liquidity. In the current situation, some investors and economists may expect lower cash flows due to possible trade barriers that may not be implemented. Higher discount rates may be occurring due to uncertainty about changes in the economic landscape and regulations. We have seen markets increase discount rates in times of uncertainty before, resulting in lower prices and increased expected returns. However, it is difficult to know when good outcomes will materialize in the future. By attempting to time the right moment to invest or redeem, one risks not enjoying the potential benefits of such materialisations. Many of those who exit the markets miss the recoveries. What we have often seen in the past is that investors who remained in well-diversified portfolios were rewarded over time.”

I appreciate you will have questions as to how this event may impact your own financial situation and I’d be happy to hear from you at anytime to discuss this further.

Please either phone me or email to get in touch.

We will provide further information as and when things become more clear.

Roland Oliver


Ethical investing: How to do it

When it comes to investing, keeping an open mind about new opportunities, new approaches and seeing new trends are all valuable things to be able to do.

There is a growing public demand for businesses that they deal with to act in a socially responsible manner.

It’s clear that public sentiment towards companies that appear to flaunt the law, act in their own self-interest is strengthening. Companies like Amazon and Starbucks, whose tax strategies are deemed less than moral, can lose customer confidence.

Continue reading “Ethical investing: How to do it”


World Market Capitalisation

Viewing the world map by relative market capitalisation illustrates the importance of building a globally diversified portfolio and avoiding a home market bias.

This cartogram, produced by Dimensional Fund Advisors, depicts the world not according to land mass, but by the size of each country’s stock market relative to the world’s total market value (free-float adjusted).

Population, gross domestic product, exports, and other economic measures may influence where people invest. But the map offers a different way to view the universe of equity investment opportunities. If markets are efficient, global capital will migrate to destinations offering the most attractive risk-adjusted expected returns. Therefore, the relative size and growth of markets may help in assessing the political, economic, and financial forces at work in countries.

The cartogram brings into sharp relief the investible opportunity of each country relative to the world. It avoids distortions that may be created or implied by attention to economic or fundamental statistics, such as population, consumption, trade balances or GDP.

By focusing on an investment metric rather than on economic reports, the chart further reinforces the need for a disciplined, strategic approach to global asset allocation. Of course, the investment world is in motion, and these proportions will change over time as capital flows to markets offering the most attractive returns.



What would you do with £381m?

The news over the past day has informed us of the largest ever undivided lottery win the United States of $590m (£381m), going to an 84-year old widow.dollars

Talk of the lottery is nearly always accompanied by a discussion of what you would do with the winnings…

But after you have stopped considering how to furnish the gatehouse, it is worth remembering that it doesn’t have to be a massive lottery win for your money to require due consideration.

Using our cash flow modelling tool, Voyant, we can create a wide variety of what if scenarios that project forward how different choices today can affect your financial outlook tomorrow.

Assets detailed for websiteWe can enter in information such as your incomes, expenses, assets and liabilities and model forward projections, such as those seen on the right.

Being at the age Gloria, the 84 year old jackpot winner, is she chose to take her winnings as a lump sum rather than 30 annual payments of £12m. Taking it in this manner reduced the sum to £240million.

This type of situation is similar to those faced by retirees and those made redundant every day as they must decide how best to take their benefits. This is exactly the situation where cash flow modelling can shine.

lotterywinCombining this with expert advice that guides you through an all encompassing view of your current circumstances, maybe you can generate some of your own luck.

Of course, if you are feeling lucky, we can even model a scenario where you win big…



How we can change your life this week

Much of human understanding of the world is built on models that attempt to recreate complex systems in a simpler form. This ranges from the reactions of the economy to a reduction in government expenditure to the effect of CO2 on climate change.

No model will ever be perfect as there are too many intricate relationships at play, but I am sure that most would agree that we are better to have some understanding of how these systems work than nothing at all.

Now let’s consider financial planning. It is one of those disciplines that, whether you are interested or not, it still applies to you. Every single person reading this blog will, in the simplest sense, have things they want to do, a number of years ahead of them, and an exhaustible amount of money flowing in and out.

timelineThere are different attitudes to this problem. Apathy is one. Some may not want to think about it because it will stop all of today’s fun.  Some may have a vague idea it will all work out. Some people may have fashioned a rudimentary spreadsheet in Excel to try and boil the situation down into hard numbers, but once the projections involve discounted values of future contributions and the timescale stretches out, things can get complicated very quickly.

At OAM, equipped with the market leading cash flow modelling software, Voyant, we can produce charts, projections, balance sheets and inheritance tax ledgers. We can put in key events such as weddings and the sale of a business. We can even kill you off next year, just to see what happens. We can tweak every assumption that lies behind the model to make it as realistic to your circumstances, and the wider economy, as is possible.

The level of detail is quite astonishing. Every change from HMRC on future tax rates are factored into models automatically, within days of announcement.

This week we made a big difference to a couple’s life, confirming that which they suspected: they don’t actually need to work anymore. They have accumulated more than enough to last comfortably until their assumed mortality age (itself selected by the client on the grounds of family history and the Office of National Statistics).

assetsIn the past we have helped clients assess their inheritance tax liability, choose between different redundancy options, set the amount of savings contributions required to pay for their children’s education and more.

As stated above, every model has its limitations, but it is worth coming to see us to gain some understanding of how your future looks rather than earning and spending money in the dark. And as we see confirmed every day when small tweaks are made to client’s plans, a change today can make life quite different in 20 years.

Malcolm Stewart


It won’t get better if you pick it

Anyone with teenage kids will be familiar with the headline above; stop picking, scratching, fiddling and generally messing about otherwise it will never heal up!

Time for a tenuous link – “What’s investing got to do with pubescence and hormones?” I hear you cry…

Well, as passive strategy investors, the idea of getting the appropriate risk-rated asset allocation right, keeping costs low and maintaining discipline is at the heart of our philosophy.

We picked up a new follower on Twitter today (for which I’m grateful) and for reasons which should become apparent, I won’t mention their name…

In essence it was (yet) another business offering guidance to my business on how to create investment strategies for clients that I think were based around “over 20 years of experience” and some very fancy software designed to spot/recognise trends/sectors that should be the best performing etc etc.

Their website makes some bold claims and some interesting references to Warren Buffet but overall I was confused as to what the point was.

All in all it seemed like another company trying to prove that by using their methodology, philosophy and gee-whiz technobabble, you can get better results from you investments.

I suggest doing less and trusting to more simple understandings will work far better.

taoismThe Chinese philosophy of Taosim has a word for it: “Wuwei”. It literally means “non-doing”. In other words, the busier we are with our long-term investments and the more we tinker, the less likely we are to get good results.

That doesn’t mean, by the way, that we should do nothing whatsoever. But it does mean that the culture of “busyness” and chasing returns promoted by much of the financial services industry and media can work against our interests.

Investment is one area where constant activity and a sense of control are not well correlated. Look at the person who is forever monitoring his portfolio, who fitfully watches business TV or who sits up at night looking for share tips on social media.

In Taoism, by contrast, the student is taught to let go of factors over which he has no control and instead go with the flow. When you plant a tree, you choose a sunny spot with good soil and water. Apart from regular pruning, you leave the tree to grow.

So we can’t control movements in the market. We can’t control news. We have no say over the headlines that threaten to distract us.

But each of us can control how much risk we take. We can diversify those risks across different assets, companies, sectors and countries. We do have a say in the fees we pay. We can influence transaction costs. And we can exercise discipline when our emotional impulses threaten to blow us off course.

I think I may have finally got my point across; to get a better investment experience, talk to us about our investment approach and don’t pick at your current one in the meantime!


Spotlight on VCTs – Part 2 of risky tax relief


of small, higher-risk trading companies not listed on any stock exchange. Fund managers of VCTs must buy predominantly the shares of unlisted companies and the investment risk is spread over a number of them.

VCTs themselves are listed and can be traded with other investors.

Income tax relief is 30% at present and the annual investment limit is £200,000. This relief is withdrawn if the shares are disposed of within 5 years. However, it may be difficult to dispose of shares even though they are listed, because tax relief is only offered on the subscriptions of new shares, not those bought in the market.

Unlike EISs, VCTs cannot be used for Capital Gains Tax deferral.

Overall, a VCT should be a lower risk investment than an EIS (featured here https://www.oliverassetmgmt.co.uk/spotlight-on-eis-risky-tax-relief/ ) because it is a pooled investment, whereas an EIS is an investment in a single company.

Approach with caution, but, if you are interested in how either VCTs or EISs could work for you please get in touch using the Make An Enquiry tab above.

Please note that all figures given represent our understanding of current HMRC legislation and this article does not constitute financial advice.


“All that glitters is unfortunately sometimes only gold…”

Gold30+ years in financial services is certainly enough time to have seen a thing or two in the investment markets.

A hardy perennial, as they might say on Gardener’s Question Time, is the subject of investing in gold.

I might even to confess to dabbling a bit in (I think) Mercury’s Gold & General fund back in the day.

Having met with a potential new client and presented our Dimensional driven passive investment strategy which seemed to make sense on lots of levels, I’ll leave it to Weston J Wellington, Vice President of DFA to make the case for not investing with your eyes and heart in the case of gold and stick to a more considered approach.

“Although the year is far from over, it’s off to a rough start for gold enthusiasts. A sharp selloff in mid-April sent bullion prices to $1,395 on April 15, down 15.7% for the year to date and 26.4% below the peak of $1,895 reached in early September 2011. (Prices are based on the London afternoon fix.) For the 10-year period ending March 31, 2013, gold enthusiasts have a more positive story to tell: The annualized return for gold spot prices was 16.83%, compared to annualized total returns of 8.53% for the S&P 500 Index, 10.19% for the MSCI EAFE Index, 17.41% for the MSCI Emerging Markets Index, and 2.34% for the S&P Goldman Sachs Commodity Index.

Taking a somewhat longer view, for the 40-year period ending March 31, 2013, gold performed in line with many widely followed fixed income benchmarks, while lagging behind most equity indices. We find it ironic that the return on gold over the past four decades is essentially indistinguishable from five-year US Treasury notes, often scorned by gold advocates as “certificates of confiscation.”

Gold vs. Benchmarks, 1973–2013*


Annualized Return (%)

Growth of $1

Dimensional Large Cap Value Index



Dimensional US Small Cap Index



S&P 500 Index



MSCI EAFE Index (gross div.)



Barclays US Credit Index



S&P Goldman Sachs Commodity Index



Barclays US Government Bond Index



Five-Year US Treasury Notes



Gold Spot Price



One-Month US Treasury Bills



Consumer Price Index



*40-year period ending March 31, 2013.

Considering the volatility of gold prices, even a 40-year period is too short to provide conclusive evidence regarding gold’s expected return. And the issue is further clouded by shifts through time in the legality of gold ownership and its changing role in various monetary systems worldwide. In his book The Golden Constant, published in 1977, University of California, Berkeley Professor Roy Jastram examined the behaviour of gold in England and America over a 400-year-plus period—and suggested that the long-run real return of gold was close to zero. Even with centuries of data to study, however, he couched his conclusions in cautious language.”

I can understand the allure but the evidence seems clear enough to me that gold just might be another get rich quick scheme that might not live up to its billing.

Roland Oliver