Preservation Of Capital With Responsible Growth

By Mark Barnicutt on October 24, 2010

At HighView Financial Group, we know that the accumulation of wealth requires patience, perseverance and hard work. It goes without saying that those who are successful in creating such wealth do not want to have to create it twice!  This view applies to both families and institutions such as foundations, endowments & pension plans.
For this reason, HighView focuses on working with our clients, and their various professional advisors, to make their wealth “sustainable“.  As a result, the investment objectives that HighView deploys with our clients is one of:
Preservation of capital, and where growth is required, such growth will be pursued in a responsible and prudent manner.
A common misinterpretation of many clients and professional advisors, though, is the definitions of “Capital Preservation” and “Responsible Growth“.  For this reason, we’ve provided an explanation of each term below:
I. Capital Preservation:
The definition of “Capital Preservation” does NOT mean that the value of the portfolio is static and never grows.  As the future purchasing power of capital is important to investors, even in environments of low inflation, the real value of a client’s capital often needs to increase over time.  As a result, except for the utmost conservative investors or investors who have such a large capital base that they are not concerned about future purchasing power, the inclusion of some assets in clients’ portfolios that protect the future purchasing power of their wealth is critical.
II. Responsible Growth:
When growth is required in a client’s portfolio that goes beyond mere purchasing power protection, HighView holds the view that such growth should be pursued in a responsible and prudent manner.  With all investing, there are risks.  The goal of a true investment counsellor, such as HighView, is to diligently pursue a client’s investment objectives but to do so in a manner in which the combination of risks assumed in a portfolio does NOT put the client’s capital at risk of material/total loss.
The analogy we alway provide to clients, when growth is required, is that we focus on “hitting a series of singles” rather than trying to “hit one ball out of the park”.  In our experience, investment approaches that attempt to “hit the ball out of the park” often result in wealth destruction instead of the wealth growth.  As a result, HighView does utilize growth strategies in clients’ portfolios when required, but it is done in a prudent and responsible manner that doesn’t incorporate “big bets” in client portfolios that jeopardizes the sustainability of client wealth.
In a global marketplace, where clients have seemingly unlimited investment choices that focus primarily on “returns” without due consideration to “risks”, HighView strongly believes that the approach of preserving the capital that has been accumulated and growing it in a responsible manner, if required, are sound investment principles for long-term capital accumulation.  The following quote from Warren Buffet exemplifies this belief:
Ben Graham wasn’t about brilliant investments and he wasn’t about fads of fashion. He was about sound investing, and I think sound investing can make you very wealthy if you’re not in too big of a hurry. And it never makes you poor, which is even better.

Warren Buffett, CEO, Berkshire Hathaway Inc.
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