The magic is in the mix. Most investors invest locally in the markets they know and in names they understand. This way they get caught in the cycles of local economies and when growth falters it damages the portfolio.

Our investment technique is investing globally which means that you have America, Europe and Emerging Markets so that you are exposed to global world growth. Unlike others who choose individual stocks and therefore are exposed to the vagaries of that company we invest in approximately 5000 stocks which are held in approximately 40 index funds. You have most segments well covered and since the push in the world markets is upwards you have a team of almost 5000 CEOs working to make your portfolio grow. What it means is that while India may be slowing down at the moment USA is outperforming and Vietnam is growing well. When you combine this with a global footprint you find that in no 10 year rolling period has this portfolio formula not done well. It is like a see-saw and when one side goes down the other goes up. The skill lies in finding the opposing pairs so that when one is down the other is up and if you are invested in more or less 40 funds which have a low correlation to each other, which means that when one is going up the other one will be going down you end up overall with a fine return. This formula has been tested and run on our own portfolio and when you see the performance bear in mind that absolutely no loans or leveraging is used because if you invest well, you get great returns without having to take undue risk.

Let me use a simple analogy to explain our investment portfolio comprised of stocks and bonds. Since we use the index approach and on a global scale I think this example is particularly apt.

To make the portfolio even more effective besides the compounding, the time factor, the rolling in of the dividends there is the annual rebalancing which brings the approximately 40 funds that hold the approximately 5000 positions. What it means is that if emerging markets have outperformed Europe then instead of making the typical investor’s mistake of putting more money into the growing sector what we do is sell the portion of that sector which has grown so that the correlation returns to what it was at the beginning of the year. What this does is you sell high and buy low. You are doing this because you know that the market is cyclical and what goes up, when that begins to soften, the other side of the seesaw will go up. But since you have sold when it was high and you have bought when it was low you not only get the growth that comes from that segment gaining market momentum but you have bought low so you get an added profit. This adds up to handsome earnings and what it does is that as you roll this forward you are making additional yield but not taking on additional risk. 10% of the portfolio is invested in products which are by their nature more prone to give a higher return so while the downside is limited because of the percentage of the position of these products since they have a tendency to outperform you get an added bonus when they go up and when they soften, the downside is quite limited.

By having such a wide investment footprint of almost 5000 products it means that there will be winners and losers but the growth of the winners will be so high that you get a good return. Individually stock picking what is good is impossible as has been proven by many studies because if one goes back for example to 1987 probably the best computer companies in the world, at that time were IBM and Hewlett-Packard and Apple was an irrelevant footnote.

In today’s market the combined value of IBM and Hewlett-Packard is a small fraction of the market capitalisation of Apple. No one can know but should you hold the entire segment you have achieved the great growth because you held everything. It is like going to a racecourse and betting on every horse that is running. One of them is bound to win and in the case of investing when you bet on all you definitely have the winners within your Inner Circle.

If there are any points that are not clear please remember that it is the work of your investment adviser to understand this and not you. He is the one with 44 years of experience and he understands this because he built it. It is like flying in first-class with a competent pilot with many years of experience and a flawless safety record. You are there to enjoy the journey while he flies you safely to your destination.