Why Financial Risks Are Worth Taking: Our Investment Philosophy

As a starting point to this blog, I thought it best to give some background on our company, our investment philosophy and some of the things that make us different.

I came into the business of helping families with their financial matters in 1979. Things were different then; interest rates and inflation were at the highest levels our country had experienced, we had gone off the “gold standard” a few years earlier, we were still recovering from the Vietnam War and we were deeply entrenched in the Cold War with the USSR. Yes, I’ve been doing this for a long time. 

The best way to learn about investing is to lose money.

 

As much as things seem to be different, they’re also very much the same. It’s impossible to predict exactly how the investment markets will perform in the next week, month or year. There’s always a vast number of things to “worry” about, whether it’s a pending crisis or a real one. 

The news is almost always terrible, with political wrangling, wars between nations, senseless killings, corporate scandals, bankruptcies and the like. Despite the headlines, we have enjoyed an improved standard of living across the globe, we have become more aware of the goings on in distant nations, and we have had the privilege of witnessing a proliferation of improved human (and animal) rights.

All I have wanted to do for the past 40 years is to help improve the financial well-being of the clients I serve. With that in mind, I have tried to think about investments and financial planning in a non-traditional sense, which might afford my clients a little better outcome than they could have obtained from the “average” advisor. 

Since success can be measured in many ways, I prefer to measure it by the average length of time my clients have maintained a relationship with me and our firm. By that measure, we have an enviable record!

It’s easy to buy and sell. It’s difficult to buy and sell with an objective to make money AND protect capital AND outperform the market averages.

I have told people that the best way to learn about investing is to lose money – yes, you must have failures in order to understand where your successes came from. There is no better “school” than the School of Hard Knocks. It’s easy to buy and sell. It’s difficult to buy and sell with an objective to make money AND protect capital AND outperform the market averages. That sounds like “all of the return and none of the risk”, which is an ambitious goal. 

We strive to deliver all those outcomes, and we don’t stop trying just because it’s difficult. The only way to achieve success over long time periods is to set achievable goals, establish methods to deliver results, and execute the plan on a consistent basis.

With all that in mind, what makes Capital Growth so different? I would say that the portfolio construction we utilize for our clients is uniquely different.

There have been many occasions when we have sold all positions for clients and hold nothing other than cash deposits (or cash equivalents). We also invest in narrow segments of the markets, whether it be a Biotechnology Fund, a fund that only invests in “deep value” stocks, or a growth fund that specializes in a small number of holdings where those holdings have unique dominance/characteristics which allow them to grow faster than their competitive peers. 

At any one time, our client portfolios look odd – they may appear to be underinvested, overinvested, too concentrated, or too risky. Since we don’t “buy and hold forever”, we can afford to have unusual holdings which can benefit from current market trends. 

It’s worth the risk to be wrong in order to have the chance to outperform.

 

We also have the fortitude and flexibility to make changes when new opportunities present themselves or existing positions disappoint. We are cognizant of investment biases which can interfere with cogent thinking, therefore, we are less apt to be influenced by factors which are not relevant to the process of growing capital.

To sum up, I don’t want our firm to be doing what everybody else is doing. I want us to be decisive and to take a stand. It’s worth the risk to be wrong in order to have the chance to outperform.

Mediocrity is not good enough – it isn’t even close to who we are.

 

Mediocrity is not good enough – it isn’t even close to who we are. If you don’t have a longer-time horizon, you’ll be disappointed with us at some point. 

If you see things from a long-term perspective and have the patience and trust to work with us over a full investment cycle, we think you’ll be pleased.

–  Art Molloy, Founder & President

Art Molloy Founder and President at Capital Growth in San Diego

THE AUTHOR

Art Molloy

Art is the Founder and President at Capital Growth. He specializes in Wealth Management. Art has 3 children and 6 grandchildren and has always had a desire to help out children who are affected by unfortunate circumstances. Learn More.

Want more Capital Insights?

COVID-19 CHECKLIST

Download our COVID-19 Financial Relief Checklist for helpful tips on navigating your finances during the pandemic.