7 Key Tenets to Successful Long-Term Investing

At its core, successful investing requires a consistent investment philosophy and discipline. We believe that buying and holding quality investments over a long period of time is the foundation for a successful investment program.

Get Rich Slow

The most significant tenet of Armory Capital Management’s investment philosophy is based on this January 1984 quote from Robert Farrell, Merrill Lynch Market Analyst.

“Get rich slow. The big fortunes that were made and kept were not made by the great speculators who got all the publicity. They were made by those who were able to sit with good values over long periods of years. But sitting with investment quality stocks is dull, and speculating is exciting. Therefore, few have the required patience”.

We believe that a conservative, long-term approach to portfolio management will be rewarding to investors who have the required patience. The evidence suggests that this quote made when the Dow Jones Industrial Average stood at 1,259.11 – still holds true today.

Belief in Capitalism, Free Enterprise, & America

Any successful investor must embrace capitalism. We understand that there have always been significant challenges facing capitalism and the American way of life. Simply stated: there always will be. Having said that, we believe that our nation's best days lie ahead, and the capitalist concept, while not always perfect, provides the only means for individuals to accumulate wealth. It has never paid to sell capitalism or America short.

A Disciplined Investment Philosophy is Critical

The most important thing about an investment philosophy is to have one. The second most important thing about an investment philosophy is to have only one.

A well-defined investment philosophy is a critical variable in a successful investment equation. We believe that a portfolio consisting of good quality, conservative investments, combined with a long-term time horizon, and the discipline to stay the course will produce excellent results over a period of years. Deviating from this tenet will, most likely, lead to inconsistent results, higher fees and potentially higher taxes. Consistency in this area is critical.

Don't Overpay For Underperformance

It is crucial that clients are informed of all of the fees and expenses that are associated with an investment advisor, financial planner or broker. Underperformance can often be a result of excessive or hidden fees. All of our clients are informed of all fees and expenses at the beginning of the relationship. In addition, each client is informed of their investment performance net of all fees and expenses.

Compare Performance Correctly

The only way to determine if an investor is being adequately rewarded for the risk they are taking is to compare performance to an appropriate index or benchmark. We often see the performance of a large capitalization U.S. stock portfolio compared to an index or benchmark other than the S&P 500 or Dow Jones Industrial Average. This results in investment performance that can be very misleading. It can also lead to very unpleasant surprises in a down market.

Taxes Are Important

If a portfolio is taxable (non-retirement), tax consequences are extremely important. High portfolio turnover is expensive – commissions add up – and almost certainly is not tax efficient. Every investor should be aware of the tax consequences relative to their portfolio and the impact they can have on after-tax performance.

Managers Manage

While taxes are extremely important, any investor must realize that taxes alone cannot drive the decision concerning when to sell. The manager and client must stay consistent relative to the investment discipline and philosophy and recognize there are occasions where there will be tax consequences. Many investors leave a significant amount of money on the table because taxes play too big a role in the investment management process.

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