The world’s greatest investor Warren Buffett and his equally successful colleague and business partner Charlie Munger haven’t become fabulously wealthy through investing in shares by mistake. Far from it.
They have achieved phenomenal success with their management of Berkshire Hathaway by a combination of skill, common sense, intelligence and above all patience.
In order to be a successful investor you need to be able to think and act intelligently and you have to control your emotions and behave in a contrarian way. You see, successful investment in shares requires mental fortitude, belief in the companies you are invested in, a stomach for accepting the disappointment of sometimes significant and irrational share price falls and bucket loads of patience.
As Warren Buffett himself once put it “The stock market is a device which transfers money from the impatient to the patient.”
Our YFS Intelligent Wealth Fund achieved a return of 56.2% in the 12 months ended 2 September 2021. In the last 12 months to 2 September 2022, our fund has generated a loss of 28.2%. In spite of the excellent prior 12 months’ performance, the past 12 months’ performance really sucks. It is massively disappointing.
Source: Trustnet 4.9.2022.
At times like this, your patience is really tested. Believe you me. However, I have great faith in our fund because I know we have invested in many truly world-class companies who have passed our very stringent qualifying criteria to be included in our fund. I have enormous faith and belief in the YFS Intelligent Wealth Fund. I know this is the time to sit tight, be patient and wait for the good times to return.
The main reason why our fund has performed poorly over the last 12 months is because we are invested 68% in technology companies and the technology sector has performed poorly over the last 12 months. We know our holdings have become irrationally undervalued but we retain complete belief in our shares. Our research shows that the technology sector is the most profitable one in the world. Also, we are all going to use technology more, not less. Furthermore, our companies are typically highly profitable, fast growing, global, scalable businesses in the best growth sector. This is why my faith in our fund is totally undiminished.
Interestingly our fund has never fallen in value during a calendar year.
Source: Trustnet 4.9.2022.
What I cannot say with conviction is when the value of the YFS Intelligent Wealth Fund will resume its excellent performance. That requires patience.
Source: Trustnet 4.9.22.
You will note from the above graph that our fund grew in value by approximately 70% between April 2020 and December 2021. That’s a period of 20 months. This is hard evidence of the high investment returns possible with this fund. However, it is important to understand that this fund is not for widows and orphans. It is more volatile than the average fund with more of a focus on Small and Mid Cap shares rather than Large Cap and with a higher concentration of investment in UK rather than US shares.
We remain patient about this fund and so should you. You know it makes sense.*
*Risk warnings
The value of investments and the income derived from them may fall as well as rise. You may not get back what you invest. This communication is for general information only and is not intended to be individual advice. You are recommended to seek competent professional advice before taking any action. All statements concerning the tax treatment of products and their benefits are based on our understanding of current tax law and HM Revenue and Customs practice. Levels and bases of tax relief are subject to change. This blog is based on my own observations and opinions.
