The virtues of common sense and simplicity

Sometimes the simplest ideas are the best. Complicating investment gets in the way of what really works - simple things like dividends, keeping costs down and buying well-diversified markets simply and cheaply.

Most of us know dividends matter over the long term. We also know costs matter hugely. Equally, although active fund managers can sometimes be wonderful creatures, sadly, for most of the time, fund managers are not worth the extra fees they charge. We also intuitively warm to concepts like the ‘risk-on, risk-off trade’, where key measures of risk are gauged and if the measures look positive we simply buy a key risk market like the S&P 500 and stay invested. If the risk traffic light goes red, we sell and sit tight in cash. Paul Marson at Lombard Odier has developed his own novel twist...