Introducing the two main investment philosophies

Today in the UK, when it comes to making regulated investments, there are two main philosophies:

The predictor

Trying to predict the future is still by far the most common approach when it comes to investing in stock markets.

The predictor takes a short-term approach, buying and selling shares based on what they think they will be worth in the near future. And some predictors are very successful for a while down to great research and their gut instincts.

But at the heart of this philosophy is trying to predict the future. No one can do that consistently well, and the outcome can be extremely damaging for investors. For a recent example, type Woodford pension fund into Google.

The tracker

The tracker works on the principle of ignoring short-term ups and downs, trusting that stock markets work over the longer term.

In the 70s a group of economists and scientists proved that stock markets have always risen over time. So, based on this principle, the tracker invests their clients’ money in a fund that aims to replicate the performance of a specific slice of one stock market. And then leaves it there to grow.

While tracking feels like a much stronger philosophy than trying to predict the future, it does have its limitations. Tracker funds can only trade at specific times of the year, which reduces potential performance. And you are still restricted in terms of the shares you can buy

Welcome to Pension Access

A Harbour Rock Capital service
Discover what you could do with your pension from the age of 55, including releasing up to 25% tax free.

Releasing pension money early is not right for everyone as it will leave you worse off in retirement. That’s why it makes sense getting help from a regulated financial adviser before making any final decisions.

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Why it pays to

be a disciplined investor

The whole point of investing money is to give it the potential to grow. The minimum you want over the long term is to match inflation, otherwise your pot of money will have less spending power in the future. And most people want to beat inflation, so they get a tangible return on their investments.
While all types of investments come with an element of risk, doing nothing comes with the guarantee that your money will, in relative terms, fall in value in line with inflation. This is why for centuries different societies all over the world have developed investment strategies.

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