How to really invest for the long term

How to really invest for the long term

For most of us, long-term financial thinking involves saving for our children as they grow up, for our retirement, or perhaps even for our grandchildren.

F&C Investment Trust, however, takes a rather longer-term view than that. The company celebrates its 150th anniversary this year, and has evolved from a business that invested in Foreign and Colonial bonds through 15 decades of changing investment strategies. From US railroads through to the Andrew Lloyd Webber musical Cats to Apple and Amazon, what tips can we take from a company that really moves with the times?

John Newlands, an expert on investment companies and their histories, says: “For any company to have traded, survived and grown for 150 years is a rare and indeed a stunning achievement, especially when the financial sector is sometimes accused of short-term thinking.

In the case of F&C Investment Trust, the founders were determined to build in prudence, diligence and diversification from the start – in short, to give what was then a troubled and risky financial sector a good name.

Paul Niven, fund manager of the Trust, adds that the company has continued to evolve, with its most recent move being towards a more global focus.

“Diversification remains an important aspect of our approach and the trust continue to be a core growth holding for many shareholders,” he said. “A diversified approach with investments in listed equities and unlisted private equity across different geographies, sectors and styles means that we are well placed to continue to deliver on our dual objectives of growth in both capital and income over the longer term.”

What can this success story for investors teach us about successful long-term investing? Some of the most important lessons can be found below.

As always please remember that investments carry risk and you may not get back what you originally invested. Past performance should not be seen as an indication of future performance.

1) Don’t disregard income

Investment is about more than capital growth. For your money to really grow, dividend income is key. F&C Investment Trust has paid a dividend every year since launch in 1868 and has increased its dividend every year for the past 47 years. Over the past decade, it has doubled its dividend payout. There is of course no guarantee that this will continue to be the case and you may not get back your original investment. The message though is clear: income is important.

2) Take some risks

Risk isn’t always a bad thing, especially if you are looking for long-term rewards. F&C Investment Trust started out as an emerging market bond fund, which is the racier end of investing. It has continued to be bold. For example, it was among the first generalist UK investment trusts to add Japanese equity exposure in the 1960s.

3) Balance change and constancy

Chasing trends at the expense of stability is not wise, but stick-in-the-mud seldom prosper. F&C Investment Trust demonstrates how to get the balance right. The company still holds stock in the first company it bought shares in, Royal Dutch Shell, as well as other constants such as Unilever.

However, it also holds technology giants such as Apple, Amazon and Netflix. Its 1970s and 1980s investments in Andrew Lloyd Webber’s Cats and Starlight Express – still paying royalties today – illustrate an ability to read the zeitgeist and invest accordingly.

4) Don’t put all of your eggs in one basket

Diversification is key for the successful long-term shareholder. F&C Investment Trust has almost 450 globally diversified holdings, with 95pc of all its portfolio overseas.

This article was first published on the telegraph website here.

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29 June 2018
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