Nick Train: Why Buy and Hold Works

VIDEO: Nick Train explains why sticking to long-term investment decisions is so important in a world that's changing so quickly

Holly Black 21 September, 2020 | 10:12AM
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Holly Black: Welcome to Morningstar. I'm Holly Black with me is Nick Train. He's Manager of the Finsbury Growth & Income Trust. Hello.

Nick Train: Good morning to you Holly, how you doing?

Black: So, just for the uninitiated, though I'm sure a lot of people have heard of the Trust. Do you want to tell us briefly what it does?

Train: The Finsbury Growth & Income Trust is a UK equity trust. Its mandate is to seek to do better than the FT All Share Index over the long term. I've now been responsible for the investment affairs of that investment company for coming up for 20 years. So that's actually the longest single track record in my entire career. And yeah, we're quite proud of the long term performance of the company.

Black: So you've been running it for 20 years. And how does this year compare to the rest, it's been a bit of a crazy one to navigate.

Train: The fact is, when you look at the share price of Finsbury Growth & Income Trust year-to-date through to this morning, the share price this year is down 5%. Now, that compares with our benchmark, which I just told you earlier, the FT All Share Index that's down more like 19% year-to-date. Now, I'm not happy at all that we're down. But it is, I think, evident that something about the way that we approach the investment challenge has helped protect some value for our investors so far in 2020 and you know, I'm delighted that we can communicate that.

Black: So I think a key word in the trust title is obviously income and this has been a year of dividend cut. So how are you thinking about that at the moment?

Train: Yeah, you know, that cuts right to the quick. Let me just tell you what the stats are. If you look at Finsbury’s portfolio, 14% of the portfolio by value has omitted its dividends altogether. They're not paying a dividend this year. Another 6% of the portfolio has reduced its dividend a bit, but that leaves 80% of Finsbury’s portfolio and that 80% has either maintained or actually increased its dividend so far in 2020. And what that has added up to, I think is two things. One, as I've just highlighted, the relative resilience of the performance of the shares is telling you that we're invested in strong companies, as evidenced by fact that 80% of them have maintained or increased dividends. The other thing is that actually just two or three days ago, Finsbury declared its dividend its own dividend through to the end of September.

Black: So Nick, you're known as a buy and hold investor you hang on to shares really for the long term, and is that investment approach challenged in a year that's so volatile or where things are changing very quickly.

Train: You know, the short answer is no. But that doesn't mean that it's right. Not to change anything. We have a set of investment principles that, we were very clear, you know, Michael Lindsell and I, Mike and I outlined those when we set the company up 20 years ago, and we've absolutely stuck to them. And one of the principles is that trading too much and switching horses in midstream, if I can use that metaphor, doesn't do investors good in the long run, you're better off having a very, very patient approach to the equity investment challenge and we just stuck to that this year. You know, it's interesting, when I look at what's worked for us, in 2020. What's worked are investment decisions that we made or choices we made about companies, like 15 years ago, you know, it's not that we suddenly changed our mind and decided on the 1st of January 2020, that what I'm about to tell you was a good idea. These are embedded long term investment ideas.

So, evidently, it's such an obvious thing to say, and it's true around the whole world, what's worked this year, what's actually gone up are companies with a credible digital investment, -- and they've got credible digital strategy for their company. You know, you know what Nasdaq's done this year the IPOs of these tech stocks is just reinforcing it. Finsbury’s biggest holding is the London Stock Exchange. The London Stock Exchange is evidently one of the UK stock markets best digital analytics data tech companies, might not be perceived as a tech company. But that's actually what it is and how it's performed. And it's up this year. So that's good. We've owned it since 2004. You know, the idea hasn't changed. So it's those sorts of long term ideas that have worked well.

Black: Nick, thank you so much for your time. For Morningstar, I'm Holly Black.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Holly Black  is Senior Editor,


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