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The true meaning of investment has been buried in a flurry of jargon,
pseudo-science and fixation on quarterly results. Baillie Gifford partner
Stuart Dunbar backs a return to basics
What’s the purpose of
investing?
The value of your investment and
any income from it can go down
as well as up and as a result your
capital may be at risk.
High frequency trading,
short selling, smart beta:
a glance back at the
investment landscape
in the past decade shows that
complexity, knee-jerk reactions and
short-termism are everywhere. The
trend baffles Stuart Dunbar, who
believes we’ve forgotten the true
reasons why we invest.
“The purpose is to deploy capital
wisely into investment projects, in
the hope and expectation of longterm
positive returns, which can be
paid back to those who invest in the
first place,” he asserts. “That is very
different from what most people
would say these days: that the purpose
of investing is to outsmart other
investors.”
Dunbar traces current bad habits
back to the point where stock market
analysis took precedence over
considered allocation of money into
enterprising projects. And he suggests
that further confusion has arisen from
the active-versus-passive investing
argument.
“There’s a very unhelpful
simplification in that debate. Rather
strangely, I’m not anti-passive. In
fact, I admire some of the big passive
providers. I wouldn’t necessarily
describe what they do as investing,
not in the pure sense, but they
provide broad market access at low
cost,” he adds.
A big problem, he believes, is that
some active managers overvalue their
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