“It’s better to have a six figure sum in the bank than a cupboard full of Hermes ties” – Titan Inv Partners

5 mins. to read

Traders and trading have always been associated with money. After all, money is the life blood of the investment industry. For many years (especially since the deregulation of the Financial Markets in the late 1980’s) there has been a certain cache associated with “a job in the City” or with the idea of trading one’s own portfolio for a living. The expectation historically, particularly amongst laymen or those commentators one or two steps removed from the industry, is of pinstriped dealers trousersing large sums of money and living high on the hog.

To some extent, the City has done little to dispel that image and it could be argued in fact that it actively encouraged it for many years. The credit crunch of 2007/2009 or Great Financial Crisis (GFC for short), with the subsequent political and regulatory backlash has put paid to that however.

Contrition and frugality have replaced hubris and ostentation in the Square Mile and beyond.

Since the GFC, incomes amongst City professionals have been slashed as business levels have fallen whilst regulatory costs have risen dramatically. Practices that were once considered an acceptable norm are now frowned upon at best, or are no longer permitted and whole areas of business have literally evaporated as banks scale back on their balance sheets and headcount.

This article is not a eulogy for the City however, rather these paragraphs are meant to be a metaphor for life in general.

Even when the financial crisis began to bite, in its early stages most people in the markets were still making good money. However, things started to change once Lehman Brothers went to the wall. Many of those who were at the coal face at the time would not have recognised this as such however. Yes they knew it was a turning point, but many participants thought it was a bottom rather than the edge of a cliff for the industry.

Pretty soon however suspicion rather than trust was to become the norm. Budgets were cancelled along with expense account lunches. The much vaunted City bonus would become a millstone around the recipient’s neck. Paid (if it was at all) in shares, taxed to the hilt and often deferred for several years. The gravy train had well and truly been derailed…

Those who remained in the industry saw their incomes severely depleted and in hushed conversations in the corners of pubs and wine bars, City traders and brokers would let slip that they were earning just a fraction of the money they were only a year or two before. Of course, the City has always been used to the cyclicality of business, but taking a “permanent” 70% pay cut came as a massive shock to people who had always assumed that they would be alright.

These people had lived up to their means in the boom years, spending what they earned and in some cases well beyond… Nor was it uncommon to hear of divorces once the money stopped rolling in, meaning that cherished lifestyles could no longer be financed.

As one trader succinctly put it: “I realised far too late that it would have been much better to have a six or seven figure sum in the bank than a cupboard full of Hermes ties.” 

What this parable tells us is that people who are living inside a bubble have little or no idea that that is where they are, or indeed any aptitude for spotting the point at which it will burst. To do so would be to admit they are walking on eggshells and perhaps that the sun will not shine tomorrow. This is alien to the human spirit which is driven by optimism as a mass.

In any walk of life, incomes and the opportunity to make money will fluctuate and as individuals we will often have little or no direct control over the drivers of those fluctuations and opportunities. However, what we can try and do is to map out a plan which, if successful, will help smooth out those peaks and troughs. Budgeting, saving and investment are cornerstones of this plan and of course no one is saying that you shouldn’t treat yourself along the way. The trick is for treats to remain just that rather than becoming the norm.

The next time you are out shopping for “luxury brands” or eating in fine dining restaurants, just think about the opportunity cost of that purchase, versus putting that money to work for you, before you place your order or hand over your debit (or worse) credit card.

This brief article is not the right forum for a lengthy discussion of investment techniques, nor is it trying to come across high handed and say how one should live their life.  Every individual’s circumstances will differ. However, building capital and a balanced portfolio through regular savings and a reinvestment of income in the form of dividends, interest payments, rent etc can have a dramatic effect on your net worth over time. After al, not for nothing did Mark Twain describe compound interest as “the 8th wonder of the world”.

Our aim here at Titan Investment Partners is to provide our clients with sustainable tax efficient capital growth over the longer term, as part of their balanced portfolio. Our funds are not meant to be a replacement for other “stable” investments, they are for those individuals who can embrace the unarguable investment tenet, that being reward is directly related to risk.

To date, and particularly within our Global Macro Fund, we have delivered to our early client adopters outsized returns as the chart below relays. Of course we can’t rest on our laurels, and indeed cannot guarantee that we will continue to deliver but, unlike most other fund managers, we are directly aligned with our investors, being (a) largely paid on performance and (b) invested ourselves in our funds.

Past performance is not necessarily a guide to the future and returns depicted are before the application of Titan’s fees.

The markets have in recent weeks been and do remain skittish and volatile with a myriad of geopolitical news and economic data driving sentiment. We were positioned for this at Titan as evidenced HERE & HERE. However, it’s often in these circumstances that investment opportunities arise. Indeed from being net short the markets, as we went into Friday morning we were resolutely long. This is how a true hedge fund should operate. Perhaps you should ask your CFD advisory firm or share tipster just how they have performed this year next time you receive a call/email from them offering to make you rich. Our advice? Buy a bundle of scratchcards instead, you’ll have more chance of making money than listening to all these guffoons!

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