YOUR PORTFOLIO
/LONG-TERM FUNDS/
THE
NEVER-ENDING
wizardry inside the latest
iPhone also has its
roots in the US
national
STORY
What makes “generational” investment plays
suitable for passing on to your children? Daniel
Lanyon finds out if there are any funds you
should never sell
O
VER ON WALL
STREET, A NEW
INVESTMENT
STRATEGY dubbed
the Chomsky Trade is gaining
popularity. Think of it as the polar
opposite of the Trump Trade – not
only because its namesake is the
leftwing intellectual linguist giant
Noam, as opposed to the populist
demagogue Donald, but also
because it’s a very long-term play
on the future rather than a bet on a
short-lived surge in asset prices.
Chomsky has previously said the
secret to investing is to research
what the Defense Advanced
Research Projects Agency (DARPA)
– a wing of the US Department of
Defense responsible for emerging
military tech – is throwing its
money at and then “go long” in
this technology for 30 years.
For example, if you’d taken a
look at its favourite projects of
the 1980s and 1990s, this would
have led you to invest in artificial
intelligence and machine learning
– a very hot market now. In fact
much of the underlying tech
research
budget from
decades back. The
rewards of this investment
philosophy are potentially
huge, but of course life’s not so
simple. So what does an investor
with a very long-term horizon do?
“Many of the incumbent dominant
companies back then no longer
exist now and have fallen prey to the
creative destruction of capitalism”
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Are there funds in which you can
tie up your cash while you wait for
2047 to roll around?
The costs associated with
investing become critical when
you are talking about a decades-
long horizon. Charges may not
seem like such a big deal at
the start, but they add
up and compound
in the same way
your investment
returns do. You
don’t just lose the
tiny fees you pay
– you also lose all
the growth that
that money may
have delivered –
and the growth on
that growth – for
years into the future.
Imagine you have
£100,000 invested in the
market. If this grew by an average
of 6 per cent each year for 25 years
and you paid no charges on it, you’d
have £430,000 by the end of this
period. If, on the other hand, you
paid 2 per cent a year in charges,
after 25 years you’d have less than
£270,000. Just a 2 per cent levy
every year would destroy almost 40
per cent of your nest egg.
Simon Evan-Cook, a fund
Charges may not seem like such a
big deal at the start, but they add
up and compound in the same way
your investment returns do
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