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Five pearls of wisdom to stop you panic-buying this ISA season

Written by: Darius McDermott
It's easy to get caught up in the flurry of ISA season; we're bombarded with phrases such as “once your tax-free allowance has gone, it's gone”, or “there's still just about enough time to make the most of your ISA”.

But, before you panic-buy this ISA season, stop! We asked five FundCalibre Elite Rated fund managers for the best investment advice they’ve received, and how this has helped them to construct their portfolios…

‘Don’t sell too soon’

Jason Pidcock, who heads up the Jupiter Asian Income fund, said the best piece of investment advice he has received is not to sell shares of a great company too soon.

“Don’t sell just because you’ve made a handsome profit if the outlook still looks great and the shares still offer value over the long-term,” he reasoned. “Absolutely ignore the advice to sell half your position just because the share price doubles from your purchase price. That is the most stupid investment advice I’ve ever heard.”

‘Take the initiative’

Manager of Rathbone Ethical Bond fund, Bryn Jones, received a valuable piece of investment advice after his first ever trade.

He said: “I remember I was a bright-eyed junior and my boss was out at lunch. A broker called me with a ‘no-brainer’ of an idea.

“Needless to say, I executed the trade and when my boss returned, I feared a telling-off; however, all he did was praise me for taking the initiative. It taught me that sometimes it’s important to act quickly to take advantage of an opportunity.”

‘Remember the power of compound interest’

Anthony Cross, who co-runs the Liontrust Special Situations fund alongside Julian Fosh, said investors cannot go far wrong by taking heed of Albert Einstein’s advice.

“Compound interest is the eighth wonder of the world – albeit with the caveat that, as an equity investor, it is earnings growth that I am looking to compound,” he explained.

“Over the years I have observed many instances where the power of compounding has eroded apparent share price ‘expensiveness’ and generated excellent long-term returns.”

‘Invest when everything’s terrible’

R. Hutchings Vernon who heads up the Brown Advisory US Flexible Equity fund, explained that a lot of what he learns comes from meeting management teams and talking to colleagues.

“A quote I go to regularly, however, is from famous investor John Templeton; that bull markets are born on pessimism, are grown on scepticism, mature on optimism and die on euphoria,” he said.

“When everything looks terrible, it’s reflected in the share prices. That’s the time to invest – when everything is terrible.

“At the same time, if you’re reading about how wonderful something is, that will be reflected in share prices too and you will be opening yourself up to valuation risk.”

‘Study your mistakes’

Manager of Marlborough Multi Cap Income fund, Siddarth Chand Lall, said the best piece of advice he heard was from Henry Kravis, co-founder of global investment firm Kohlberg Kravis Roberts & Co.

“It’s about self-examination. When I make an error or a mistake, I go back and study it. As a team, we’ve spent a long time discussing these things and asking ourselves where the red flags have been when we have missed them,” Lall said.

“You also can’t just jump to a conclusion by joining the dots and presuming holdings in similar areas of the market or financial positions will suffer; you have to analyse every investment case without prejudice and with a fresh pair of eyes. Therein lies the opportunity to avoid another mistake.”

Darius McDermott is managing director of Chelsea Financial Services and FundCalibre

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