Worldwide Financial Planning

I have always liked Peter Lynch’s line “there is always something to worry about”. It should be stamped on the front of every fund factsheet, preferably in red ink and next to the glossy one-year performance chart.

The biggest risk most investors take is not market risk. It is concentration risk. That is the risk of having too much exposure to one company, one sector, or one country without realising it.

If you cannot explain a business simply, you probably do not understand it well enough to own it when life gets noisy. He had what amounted to a crayon test - if the investment case could not be set out in plain English, quickly, without jargon, then the problem was not the company, it was your understanding.

Peter Lynch's track record at Magellan is, by virtually any measure, one of the most remarkable in the history of active fund management.

If we want no movement, no discomfort and no surprises, cash has a role. But if you want long-term growth which gives you buying power over inflation, volatility is simply part of the deal. It is the entry fee and the opportunity.

There is a persistent idea in retirement planning that the sensible way to take income from investments is to live only on the dividends from shares and the interest from bonds, while never touching capital. It sounds prudent - like the sort of thing your grandfather may have nodded at over the newspaper.