The 10X Investing Principles explained

At 10X, we believe that achieving your investment goal shouldn’t be a matter of luck. Which is why we have three core principles we stick to in order to deliver competitive, long-term investment results – and which give you the best chance of reaching your investment goal.

1. Invest in the right portfolio

The industry often equates equities (the stock market) to risk. A High Equity balanced portfolio is often called a High Risk Portfolio while a Low Equity balanced portfolio is often called a Low Risk Portfolio.

We see the world differently. Your asset allocation needs to be tailored to how long you have left in the market. If you are investing for periods of longer than 5 years, you should be invested in a High Equity portfolio.

This is not a ‘risky’ strategy. We believe Investment risk is about failing to meet your investment goal, which can happen because you saved too little, your return was too low or your fees were too high.

Using over 100 years of actual returns, we find that over periods of five years and longer, a High Equity Portfolio has always delivered superior returns with similar or lower risk than Medium or Low Equity Portfolios. This means that for long-term investors (five years and longer) a High Equity Portfolio is a higher return, lower risk investment than a Low or Medium Equity Portfolio.

For periods shorter than five years, the High Equity Portfolio has produced lower returns in poor market conditions.

The key to investment risk is to invest according to your time horizon and monitor your returns against your time horizon and ignore the short term financial market volatility.

10X will always structure your portfolio in an appropriate way that makes the most of the time available to you.

2. Low Fees: 10X’s 2% difference

"We found that the cheapest funds were at least two to three times more likely to succeed than the priciest funds. Strikingly, our finding held across virtually every asset class and time period we examined”. Morningstar® FundInvestorSM Study 2016

Research has consistently shown that investment fees are the most reliable predictor of future performance. High fee funds produce below average returns while low fee funds produce above average returns.

Most South African investors pay total fees of around 3% pa. This fee is typically comprised of an investment management, administration and advisory fee.  

This extra 2% may not sound like a big difference, but did you know that over a 40-year savings period, this can add an additional 60% to your investment value?

At 10X we are committed to charging you a total fee of less than 1% pa excl. VAT. You don’t have to pay for investment advice or worry about volatile investment markets, as the appropriate advice and risk-management are already embedded in our solution.

3. Index Tracking

Broadly speaking, there are two investment styles that investors can adopt. The first is active management, where a portfolio manager “actively” moves your money around depending on their predictions of where best to invest. These funds typically have higher fees due to more expensive management costs.

The second investment style is passive management, or index tracking, where your money is invested in a selection of companies within an index, and is left to grow over the long-term.

Time and again, research shows that index funds outperform active managers – In fact 1 in 4 actively managed funds fail to beat the market return[i]. Is it any wonder that the world’s best investor, Warren Buffet, imparted these wise words of advice to investors: “Put 90% of your money in a low cost index fund. The long term results from the policy will be superior to most investors who employ high fee managers.”

In short: all the evidence supports the position that index tracking gets investors more in the long run, with greater reliability, better performance and lower costs. That’s a win-win-win situation in our books.

At 10X we don’t believe in gambling with your life’s savings. We track the index, positioning you for better long-term outcomes.

As with most recipes for success, the whole is always more than the sum of the parts. Low fees, index investing and life-staged portfolios are important investing principles in their own right, but at 10X we believe that the real magic happens when you combine them, as we have, into one simple solution, which is exactly how we are able to offer our investors competitive returns at a fraction of the industry cost.

[i] SPIVA Statistics & Reports, Dec. 31st 2015, Percentage of South African Equity Funds That Underperformed the S&P South Africa DSW, Five Year Periods.

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