So I really am not surprised that the vast majority of Britain's Isa savers stick with cash despite the paltry returns on offer. The arrival of the new enhanced Isa – the Nisa – will do little in itself to change this. I hope the efforts of the Wider Share Ownership Council – whose relaunch event I attended last week – can overcome the disdain for equities. But it will certainly be busy, because there is a long to-do list of improvements required to convince the public at large that buying shares is no more of a gamble than leaving your cash to the mercy of inflation; in fact, if we pay attention to the rule of 72, which says it will take 50 years to double your money in a cash Isa, it is arguably less risky.
Of course many of you will already know that much of the risk can be taken out of equity investing by sticking to simple principles and avoiding the great many temptations and confusions that are thrown in our way. One of these virtues is patience. I have previously discussed why this is any investor's biggest asset. Put simply, once you've found the right investments for your portfolio time does the rest, thanks to the wonders of compounding and the avoidance of costly practices like churn. Warren Buffett summed it up neatly when he said that "our favourite holding period is forever."
Of course, finding those great investments isn’t always that simple. Back a dog and no amount of patience will see your investment grow – another bit of Buffettology sums this up neatly: “Time is the friend of the wonderful company, the enemy of the mediocre”, said the great man.
Indeed, another core principle of investing is that you should always buy quality. But, as our cover feature this week points out, putting one’s finger on what defines quality is harder to do, despite the best efforts of management consultants over the years. My personal view is that, all the tried and tested principles of management aside, it’s the company whose shares sit in your portfolio, churning out dividends and steady growth without you ever having to worry about it.
I am sure that many of you already have such quality stocks. For me that great company is Rolls-Royce. It has many virtues, but they can be summed up very briefly: it is the epitome of engineering excellence, at the forefront of a secular growth trend of global travel. It has had, and will certainly have more, ups and downs, but its hard to imagine a world without it – that’s why I’m in for the long haul.
