“What gets projects done for me is not inspiration. It’s curiosity and rigour.” – Andrew Zuckerman
Rigour – the quality of being extremely thorough and careful, meticulous, with precision and accuracy.
Having someone take time to apply an appropriately granular level of detail to their work is reassuring. As Seth Godin wrote, “A rigid approach is easy to describe, but it’s brittle. Being rigid takes little imagination and a fair amount of fear. On the other hand, approaching our craft with rigour means we are able to eagerly shift in the face of reality. Rigor is a combination of expertise, awareness, and flexibility. And it’s often in short supply.”
Rigid shares the same etymological origin from the Latin verb “rigere” – to be stiff, unable to bend or be forced out of shape, inflexible, unyielding, and unchangeable. However, from a client’s perspective, rigour is the preferred option.
So, where does robust, the final member of this trio, fit? It is a word used frequently in the world of investment; every firm has “robust processes” and “robust research and analysis.”
But what criteria would qualify a process as “robust”?
Let us use a deliberately simplified example. A manufacturing process has inputs which determines what is produced. Yet if there are even minor variations in these inputs the accuracy and quality of the result can be compromised. We believe a truly robust process should be able to withstand small variations in inputs and still deliver a stable outcome.
In investment terms the essential quality of any portfolio is its ability to tolerate and absorb market volatility or, alluding to our previous example, “variations in inputs.”
Index tracking funds deliver close to market returns at very low cost, which are key reasons why we include a global bond and global property tracker in our portfolios. They are, however, defined by their requirement to regularly reset to pre-determined parameters. For example, only the top one hundred companies by market capitalisation appear in the FTSE 100 index. Every FTSE 100 Index tracking fund must sell the shares of companies that fall out of the index and buy the new entrants. This happens on the same date every period – quarter, monthly, or yearly depending on the index. The levels of extreme volatility this year caused some index providers not to reconstitute, arguing this volume of activity would add to the already unsettled market. This suggests that indexing, whilst effective in delivering market performance at low cost, has been a victim of its more defined, rigid rules of operation.
Our portfolios at Stewardship Wealth are built to withstand variations in prevailing market conditions. Every constituent part reflects and preserves each client’s risk and return requirements. Diversification, or investment spread, plays a crucial role in managing risk by creating an appropriate blend of shares, bonds, property, and cash. We believe that maintaining a robust and rigorous investment process allows us to provide a great investment experience for our clients. One that pays dividends of security, peace of mind, and confidence. In fact, it’s what our clients tell us they value most.