Investing – Keep It Simple, Stupid

The purpose of investing is not to outperform the market or follow fashionable strategies, but to ensure that financial resources support real objectives: financial independence, flexibility around work, protection against unforeseen events, and a sustainable retirement that does not depend on continued clinical income. Our investment philosophy is therefore tightly integrated with life planning and cash-flow modelling, rather than being treated as a standalone activity.

Core Investment Beliefs

You use evidence-based medicine, our approach is evidence-based investing built on data collected from decades of market history. While markets and products evolve, these underlying principles have remained remarkably consistent.

Asset Allocation as the Primary Driver of Outcomes

The most important decision in investing is how assets are allocated between growth assets, such as equities, and defensive assets, such as high-quality bonds. Equities have historically delivered the strongest long-term returns, but an all-equity portfolio introduces levels of volatility that many doctors and surgeons find uncomfortable, particularly when approaching retirement and your financial plan involves income withdrawals or a reduction in clinical workload.

Equally important, taking maximum risk is often unnecessary. Many clinicians accumulate substantial capital over relatively short but intense earning periods. The objective is not to take the highest possible risk, but to take only the level of risk required to meet clearly defined goals.

The Impact of Costs

Costs are one of the few variables investors can control. As the late Jack Bogle, founder of The Vanguard Group, observed: “You get what you don’t pay for.”

Every pound lost to unnecessary fees is a pound that cannot compound for future use. Over a multi-decade investment horizon common for doctors who may start to invest in their 30s through to their 80s, cost control has a significant effect on outcomes.

Diversification as Risk Management

Diversification is not about maximising returns in favourable markets but about reducing the risk of permanent capital loss. We diversify across asset classes, global markets, and different investment styles. We avoid a home-country bias, as concentrating wealth in a single economy can increase risk without improving expected returns.

Some say diversification means always being disappointed by something in the portfolio. In practice, this may be true. At any given time, some holdings will underperform. Over the long term, however, diversification has historically produced more stable and predictable outcomes.

Market Efficiency and the Limits of Prediction

Consistently beating global markets by selecting the “right” funds, countries, or sectors in advance is exceptionally difficult. Similarly, timing entry and exit points reliably has not proven achievable for most investors, including professionals.

For clinicians whose time and energy are better spent on patient care or running a private practice, we believe a disciplined, rules-based approach is more appropriate than attempting to forecast short-term market movements.

The Link Between Risk and Return

Higher returns require higher risk, there are no shortcuts. Our role is to ensure that clients accept no more risk than is necessary to meet their objectives, and that this risk is aligned with their capacity to tolerate market fluctuations, particularly in retirement and income is being drawn from investments.

The Importance of Rebalancing

Over time, growth assets tend to outperform defensive assets. Without periodic rebalancing, portfolios can drift into higher-risk positions than originally agreed. Rebalancing is therefore essential to maintain alignment with a client’s risk profile and financial plan, rather than allowing market movements to dictate risk levels.

Risk Management Across the Market Cycle

Not all assets behave well during market stress. We exclude certain asset types, such as high-yield bonds, because their risk-return characteristics deteriorate significantly during turbulent periods. For doctors approaching retirement or reducing private practice commitments, limiting downside risk becomes increasingly important.

Managing Concentration Risk in Equity Markets

We also make considered adjustments within equity allocations, including exposure to emerging markets and smaller, value-oriented companies. These adjustments have historically helped reduce the risk of over-reliance on a narrow group of large companies, particularly during periods of market excess. This is especially relevant for clinicians who may retire just as markets enter a prolonged downturn.

A Long-Term Perspective

Our investment philosophy is informed by close to a century of global market data. We invest with multi-decade horizons in mind, particularly when advising doctors whose retirement planning often spans long careers.

Investing in Practice

Understanding the client, not the market is always our first step. For doctors and surgeons, this includes current and future NHS income, private practice cash flows, pension structures, tax considerations, lifestyle goals and “the here and now”.

From there, we determine an appropriate balance between growth assets, which aim to deliver returns above inflation, and defensive assets, which help reduce volatility and limit losses during market downturns. The objective is to achieve sufficient growth while maintaining a level of risk that allows clients to remain invested through challenging periods.

A Deliberately Simple Approach

Investment history is filled with examples of complex strategies that appeared robust until markets turned against them. The global financial crisis of 2007–2008 is a reminder that complexity does not equal resilience.

We favour transparent, evidence-based investing, built to support long-term planning rather than short-term narratives. This is the same approach we use for our own investments.

At Foundations Financial Planning, investing is an important component of the financial plans we build, but it is a small part of the service we provide. For doctors and surgeons, particularly those with substantial private practice income, our aim is not investment performance, but the ability to meet life objectives with confidence and clarity.

The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.