Whether you are working towards your ideal future or have worked hard to achieve it, we understand that every client wants the confidence that their wealth is being managed with the diligence & expertise necessary to meet these important goals.
At Murphy Hill, our investment process is guided by time-tested principles & beliefs that have supported our clients on their wealth creation journeys, through good times & bad, to help them achieve what’s truly important.
These principles act as a north star, offering direction & certainty during difficult times, where the short-term gyrations of the market or news cycle risk steering investors off course, and restraint & clarity when the exuberance of the crowd takes hold.
Taken together, these principles underpin our approach to managing your wealth & your investment success.
It starts with you, our client.
Your needs & aspirations are as unique as you are, that’s why our investment process starts with you.
Together we uncover what’s important to you, what you’d like to achieve, when you’d like to achieve it, your tolerance & appetite for volatility, and the trade-off decisions that are involved. Ultimately, it’s your life goals that inform the investment objectives which underpin our approach to portfolio construction & wealth management.
These goals give your investment objectives their purpose & help you to stay the course through the years of investing we’ll do together. Overtime some goals may change, while others are achieved, making room for new opportunities & priorities.
We’ll support you on each step of this journey, ensuring that your strategy & investment portfolio evolve in line with your goals & priorities.
Patience is a virtue: markets reward low-time preferences.
Humans have an innate tendency to prefer the satisfaction of immediate wants to the neglect of our long-term interests, an evolutionary artifact that improved our chances of survival since our pre-historic origins. While this has undoubtedly served us well, this behaviour is not well adapted to investing, where a long-term focus is much better suited.
Long investment horizons (typically 10+ years) offer patient investors the opportunity to earn substantial returns from risky assets, where the phenomena of compound growth can significantly enhance wealth, while reducing the risk of short-term negative movements in prices.
For investors who can focus on the long-term, time-in-the-market is a superior strategy to timing-the-market, allowing portfolios to benefit from the effect of compounding without the detriment of excess trading costs, taxes & missed opportunity costs that all accompany attempting to time-the-market.
We help our clients remain invested during periods of market turmoil, keeping them focussed on their long-term objectives, & advising them to take advantage of opportunities as they arise, to ensure that their experience in the markets is fruitful & their patience rewarded.
Markets are generally efficient, but not always or everywhere.
Market efficiency is the idea that asset prices are always fairly valued, reflecting all knowable information at any point in time thanks to the thousands of people who are transacting in that market. The implication is that no opportunity exists to profit from mispricing in asset markets because they are always priced ‘just right’.
While nice in theory, it’s not always true in practice. Certain markets have less analyst coverage & trading activity than others, increasing the opportunity for mispricing. Similarly, strong psychological forces of greed & fear can overpower the discerning restraint of investor rationality, sending prices above or below what can be justified.
We incorporate this dynamic into our ‘core-satellite’ portfolio construction approach by employing low-cost ‘core’ investments where markets are usually efficient & complement this with skilful active manager ‘satellites’ who have demonstrated expertise in capturing market mispricing.
Diversification is the only free lunch in investing.
“Don’t place all your eggs in one basket” is age-old advice. This idiom serves many domains in life as an effective way to reduce the risk of an unpleasant outcome, but in portfolio management it does much more – it increases returns while reducing the variation of the portfolio’s value. Taken together, diversification increases the likelihood that your investment goals will be met.
Diversification means introducing a variety of difference to a portfolio. Different asset classes, markets, investment managers, assets, countries & currencies all play an important role in constructing a well-diversified portfolio which maximises its long-term return potential.
We construct portfolios with these principles in mind. By design, a well-diversified portfolio is more than a simple sum of its parts, it is the interaction of the whole which is important.
Dividends & franking are reliable contributors to after-tax total returns.
Cash flow requirements, now & in the future, are a fundamental starting point when developing investment return objectives. Whether the goal is to replace a salary in retirement, finance a business venture, or fund your ongoing legacy, achieving the necessary level of cash flow with a high degree of reliability is crucial.
Total returns, income plus growth, ultimately drive investment outcomes & the success or failure of goals. While it is the ‘total’ which matters, increasing the reliability of the underlying components increases the chance of achieving the portfolio’s return objective.
Dividends are typically more stable & predictable than capital growth, which makes owning shares in high-quality dividend-paying companies an attractive cornerstone to most investment portfolios & risk profiles, offering reliable income & growth potential. Refundable franking credits, representing tax-paid by the company, are another source of income that enhance after-tax returns.
We focus on meeting our client’s cash flow requirements with portfolios that aim to deliver a robust after-tax total return, underpinned by reliable income streams & capital growth potential.