29 July 2009

Dear Investor,

Why do people invest?

We can't talk for others, but we know La Trobe investors aim to increase their personal wealth.

Wealth means different things to different people. Wealth may mean you can . . .

  • Buy a house
  • Upgrade your car
  • Take an around-the-world holiday of a lifetime
  • Retire earlier
  • Buy a better house
  • Buy a Ferrari or a yacht
  • Start a business
  • Install solar panels on the roof of your house
  • Join the growing ranks of philanthropists

You get the picture. If we could sum it up in two words, they want 'flexibility' and 'choice'. Wealth gives you flexibility and choices.

But not all wealth is created equal. Some people inherit wealth. Some are career high-fliers, earning big business mega bucks. Some start, or some run their own successful businesses. Some make it in property. Some make it by simply saving as long and hard as they possibly can. Some get very, very lucky and win lotto.

If we were to simplify the great investing secrets, we'd suggest they could look something like this:

Secret #1 Invest only with companies who have sustainable competitive advantages, managed by smart, passionate people.

Secret #2 Invest into those companies over a number of years.

Secret #3 Hold those investments for the long-term.

Simple? If the formula is so simple, why aren't there more investing billionaires? The answer may be that most investors don't follow simple investing disciplines.

How to never lose money

When Warren Buffett speaks, the investing world listens. There are hundreds of classic Buffett investment quotes, most of them amazingly simple. One of our favourite Buffett quotes is . . .

"Rule No.1: Never lose money.
Rule No.2: Never forget rule No.1."

Unfortunately these rules are impossible to follow. Even the great Buffett himself has lost money. We've all had losing investments. It comes with the territory. If you were afraid of ever losing money, then investing is not for you. We all can, and will, make poor investment decisions over our lifetime.

Reducing risks - How to preserve your capital

There is only one word to describe the state of affairs in world wholesale financial markets right now. It's a four-letter word, so for those of you who don't like swearing, look away now. Until the second half of 2007, many people hadn't used this word since 2003. It had simply disappeared from their vocabulary. Forgotten . . . ignored . . . gone . . . But now it's back . . . RISK.

Believe it or not, when you invest you immediately take on a level of risk. Believe it or not, stocks can go down as well as up. Believe it or not, private equity is not a licence to print money. Believe it or not, the housing market can go down as well as up.

It would be easy for us to sit here and say that over the long-term, this financial markets crisis is likely to be totally insignificant. But that comment might be viewed as a bit flippant, given that some people have lost money already. No-one likes to lose money, and we don't like it when people lose money.

Amongst all this hype we think it is more important than ever to think rationally. Don't jump the gun. Don't let fear make you pull out of good investments.

This sort of analysis is nothing new. Whatever the market conditions, when it comes to our loyal investors, we always maintain our time-tested rigorous approach, as summarised by our Three Rules of Investing. They are:

  1. Never put all your eggs in one basket;
  2. Recognise higher returns equals higher risk; and
  3. Getting rich slowly will never go out of fashion.

Best regards,
Chris Andrews


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Chris Andrews
Head of Funds Management

t  +61 3 8610 2811
e  candrews@latrobefinancial.com.au

Chris Andrews is the Head of Funds Management for the La Trobe Group and has responsibility for the La Trobe Australian Mortgage Fund.
Read full profile here.

La Trobe is one of Australia's leading independent specialist mortgage Financiers. Its business includes residential mortgages, commercial mortgages, and investment services operating one of Australia's largest Mortgage Funds under AFSL 222213. It employs over 115 staff and has raised over AUD$10Billion to assist over 100,000 customers since inception in 1952.

Copyright 2010 La Trobe Financial. All rights reserved. No portion of this may be reproduced, copied, or in any way reused without written permission from La Trobe Financial. Disclaimer

* La Trobe Financial Asset Management Limited ABN: 27 007 332 363 and AFSL No: 222213 is the issuer and manager of the La Trobe Australian Mortgage Fund. It is important for you to read the Product Disclosure Statement for the Fund before you make any investment decision. You can get a copy of the PDS by calling 1800 818 818. You should consider carefully whether or not investing in the Fund is appropriate for you.
(1) The rates of return from the Fund are not guaranteed and are determined by future revenue of the Fund, and may achieve lower than expected returns. Past performance is no guarantee of future performance. Investors risk losing some or all of their principal investment.
(2) Withdrawal rights are subject to liquidity and may be delayed or suspended.
(3) As at 30/11/10 the La Trobe Australian Mortgage Fund had received a Morningstar RatingTM of 5 stars. The Morningstar Rating is an assessment of a fund's past performance - based on both return and risk - which shows how similar investments compare with their competitors. A high rating alone is insufficient basis for an investment decision. © 2010 Morningstar, Inc. All rights reserved. Neither Morningstar, nor its affiliates nor their content providers guarantee the above data or content to be accurate, complete or timely nor will they have any liability for its use or distribution. Any general advice has been prepared by Morningstar Australasia Pty Ltd ABN: 95 090 665 544, AFSL: 240892 (a subsidiary of Morningstar, Inc.), without reference to your objectives, financial situation or needs. You should consider the advice in light of these matters and, if applicable, the relevant product disclosure statement, before making any decision. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/fsg.pdf
(4) 3.75 star rating out of a possible 5 star rating indicates that Adviser Edge believes that La Trobe has performed in line with its peers and exceeded its peers on some fronts.
(5) The Standard and Poors rating of 4 out of 5 stars indicates that S + P has high conviction that La Trobe Financial will consistently generate risk-adjusted fund returns in excess of its relevant investment objectives and relative to its peers.
(6) The award was given to the La Trobe Australian Mortgage Fund, Pooled Mortgages Option.
Research Ratings are subject to change. To view the latest research information please visit www.adviseredge.com.au or www.standardandpoors.com.au. Ratings issued by Adviser Edge Investment Research AFS Licence No. 236783 and Standard & Poors Information Services (Australia) Pty Ltd AFS Licence No. 258896 are solely statements of opinion and not statements of fact or recommendations to purchase, hold, or sell any securities or make any other investment decisions. The ratings are only one factor to be taken into account in deciding to invest. Research Houses receive a fee from La Trobe for rating the product. The Adviser Edge rating is generally a measure of the rated entity's capacity to meet its repayment obligations in all market circumstances.
IMPORTANT: This message, together with the La Trobe Financial website (www.latrobefinancial.com.au) and all its contents have been prepared for general information only and should not be taken as legal or financial advice, and as such the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Individuals should therefore talk with their financial planner or advisor before acting on any information present on this message or the La Trobe website.