There can be no doubt that technology advances have made the accessibility of information greater than it has ever been, no longer are we reliant on the daily broadsheets or visits to the library to gather the information we require on which to base our decisions. A simple connection to the internet can now provide us with this information and more, all from the comfort of our own homes or indeed anywhere with internet accessibility on our smartphones.
In 2003 Eric Schmidt, then CEO of Google, noted “we create as much information in two days now as we did from the dawn of man through 2003”. Today Google’s index now contains over 48.5bn web pages and processes 40,000 search queries every second.
The world of investments has not escaped this revolution and the number of providers of information which investors, current or potential, can access has grown exponentially. It is now very simple to obtain information on funds and markets such as performance data. As with everything however the availability of such vast amounts of information does not necessarily make the task of identifying what is important and what is not easier. It can actually make it more difficult. When presented with a vast amount of data it can be very difficult to disseminate the information which is needed to arrive at the right conclusions.
The way information is reported can also create behavioural bias amongst investors. The race to be the first to report breaking news means that today we receive information as events occur. This can create knee jerk reactions in the market place, some of which can prove to be the wrong decision to make. The fear of going against the herd however is enough for some investors to feel compelled to act. This can initially prove rewarding as momentum within markets carries the prices of assets in the direction from which you will benefit. Those who are early to trade can profit and benefit. Those following however often benefit less, if at all, and find themselves crowded with others.
So in an age where we are surrounded by ‘information overload’ how can we disseminate what is important in order to be able to make sensible investment decisions? At Lowes, we believe the key to success is by having strong and most importantly repeatable processes in place. Tried and tested processes, which have proven themselves during different periods of the investment cycle and through a range of market events, can help us avoid the short term noise which we now constantly hear. This allows us to remain focussed on the fundamentals which, over the medium to longer term, are likely to be the key determinants of investment returns.
With regard to fund manager selection we have in place bespoke software along with analysis tools which help us to identify the performance attributes which we are looking for. In today’s markets however we believe it is just as important to understand how a manager is positioning their fund rather than simply relying on historical performance data. We are constantly meeting with fund managers, those who we currently allocate to and just as importantly those that we don’t. So far during 2016 we have heard from 117 fund managers and over 50 fund group representatives. Not only do we use today’s information but we also recall what has happened in the past through the experience we have gained. “History doesn’t repeat itself, but it often rhymes” (Mark Twain).
For all its vast abundance, information is clearly important in the many forms in which it is available today. However it is the interpretation of this information which is, and always will be, key to arriving at the right decision.
To quote Clifford Stoll, “data is not information, information is not knowledge, knowledge is not understanding, understanding is not wisdom”. All together however they can help us to improve our decision making.