Anthony Cross: What I've learned over 20 years of investing

When I joined Liontrust in October 1997 I was afforded time and space to document my thoughts regarding investment process and philosophy before applying them to client money in January 1998.

As well as inevitably rueing the speed at which these two decades have flown by and marvelling at the events they’ve encompassed – including the arrival of three children, the oldest of which is now applying to university – this anniversary has also prompted me to contemplate what I’ve learned about investing over that time.

Is investment experience valuable? Or perhaps more pertinently, given the economic and corporate changes over the last 20 years, is our investment approach as valid now as it was then?

There have been huge changes to the way we work, the type of companies found on the stock market and the technology that infiltrates most facets of our day-to-day lives over the past 20 years, but I am confident the fundamentals of a good business are the same now as they were in 1998.

If I was to sit down and repeat the exercise I undertook for that final quarter of 1997, assessing and summarising the most effective way to invest in the UK stockmarket, I believe that I would end up with an investment process that mirrors the one we apply today. The importance of barriers to competition – one of the fundamental tenets of the Economic Advantage investment process – is as great as it ever was, perhaps more so given that technology is in many ways lowering the start-up costs for new businesses entering markets.

A lot of the changes in financial markets and office working since 1998 have served to level the playing field between large investor and small, and this can only be a good thing.

In the days before email, high-quality video conference streams and instantaneous downloads, it paid to be a large or influential investment house that might receive one of the morning’s first broker calls on the day of a company’s results. It used to be the case that face-to-face meetings with corporate brokers and company management was still seen as necessary to keep tabs on investments. In 2018, all investors can access the same depth of information simultaneously.

This growing availability and depth of information means that the amount of ‘noise’ one is subjected to as an investor is growing all the time. One of the biggest challenges is to cut through this noise and separate the fundamental from the incidental.

In this regard, experience has taught me the importance of controlling my emotions and developing resilience. As the years have passed, I find that my composure and assurance have grown. I hope this means I am far less likely to respond negatively when under stress, or to react to events in an irrational manner. The ability to weather the onslaught of market noise and withstand swings in investor sentiment is one of the most valuable skills I’ve learned.

There have been good, bad and indifferent markets for us over the past 20 years, but I try where possible to detach myself from shorter-term market sentiment. Getting too worked up during difficult periods doesn’t serve you well in the long term and risks leading to poorly considered decisions.

Instant decisions are very often the ones you end up regretting. It takes a long time to get to know and fully understand a business in which you are invested, which is why an average holding period for a stock should be measured in years rather than weeks or months.

In my experience, it simply doesn’t pay to chop and change your holdings as company news flow feeds through.

Anthony Cross is a fund manager at Liontrust Asset Management.