Metis AM
Nature is an innovator, and Charles Darwin demonstrated this to the world when he published his first work, a journal detailing his travels aboard the HMS Beagle. Darwin spent much of his time on the coast of South America, studying the world around him and collecting samples of plants, animals, rocks, and fossils.
It was these samples that sparked his groundbreaking theories, which he shared with palaeontologists and geologists. These discoveries led to a deeper understanding of how the natural world evolves, from landscapes to living creatures. In 1859, he wrote On the Origin of Species, which formally introduced his theory of evolution.
In this, he introduced “survival of the fittest” as a core pillar of evolution. Darwin put forward the idea that the more a species is suited to its environment, the more likely it is to survive.
There are five core rules to this theory:
- Variation
- Inheritance
- Selection
- Time
- Adaptation
Here’s how you can apply Darwin’s five principles of evolution to your investment strategy, ensuring it is fit to survive through changing market conditions.
Variations in your investment portfolio could help your wealth thrive
In Darwin’s theory of evolution, variation refers to the natural differences that exist between individuals within the same species. These variations could include differences in size, shape, colour, or even speed, and are vital for natural selection to occur.
For example, during his travels, Charles Darwin observed that the various species of finches on the Galapagos Islands had different beak shapes depending on which island they inhabited. This helped them access the food most readily available in those areas, whether they were hard seeds or softer fruits. This is variation in action and helped the birds survive in their respective environments.
To apply this concept to your investment portfolio, it’s clearly important to hold a diverse range of assets spanning several geographical regions and various asset classes. However, variation goes beyond the simple theory of diversification.
Consider equities as an example. While they’re generally considered a single asset class – just as finches are one species of bird – they can vary widely.
You may hold shares in technology corporations and some in energy businesses. Some may even be in fashion and media. All these variations can exist in a single “species”.
Looking closely at each asset class and ensuring you’re happy with your selection – more on this topic later – could help your portfolio adapt and thrive under existing and future market conditions.
Inheriting financial knowledge could pave the way for greater success
Darwin observed that traits are often heritable. In living organisms, characteristics are inherited or passed down from a parent to their offspring. Though, at the time, Darwin did not know this was because of genes, it tells us something important about the transfer of knowledge.
Advantageous traits are passed down genetically, allowing species to build on the success of their ancestors. And, crucially, parents teach their offspring how to use these advantages to survive and thrive.
When it comes to your financial plan, you too could benefit from the wisdom and knowledge of those with different experiences and expertise.
You might have inherited or earned a sum of money, but without the right knowledge, this wealth isn’t guaranteed to secure your financial freedom. To put what you have received to good use, you may require some expert guidance.
Earlier in life, your parents or schooling may have helped shape your relationship with money. Today, working with an adviser could bolster these “inherited traits”, as they can share their knowledge, expertise, and experience with you.
The theory of selection could help you weather unpredictable markets
“Selection” in the theory of evolution refers to the well-known concept of natural selection. This is the primary way that evolution takes place. In nature, dangers presented by predators and the environment help build a more robust species – one that is better suited to survival.
In investment terms, “dangers” to your portfolio could include market volatility, rising inflation and interest rates, and even geopolitical events and other global uncertainties.
In the natural world, the evolution of a species can take thousands of years. Where your portfolio is concerned, you have the advantage of more than 100 years of market data to help inform your decisions and influence your own process of “selection”.
Strong portfolios can stand the test of time, just as a strong species can, so select what works for you to help build your defences. This could include diversifying your portfolio, exploring tax-efficient strategies, or boosting your contributions in your pension, to name but a few.
Adapting carefully to market changes could mean long-term survival
Adaptation is a cornerstone of evolutionary success, as organisms that can adapt to changing environmental conditions are more likely to survive and thrive. This could involve developing new traits, behaviours, and strategies to tackle challenges and take advantage of opportunities.
An example from nature is the remora fish. These fish, according to Britannica, use a suction disc adapted from dorsal fin spines to attach to a host, such as a shark, manta ray, or whale.
As a result, they have easy access to scraps of food and keep their hosts clean and free from parasites. This is a brilliant example of an adaptation that took on just enough risk to justify the reward.
Similarly, you could look at adapting your investment portfolio as market dynamics change. However, when exploring new opportunities, it may serve you to approach with caution.
Remember, your long-term investment strategy should remain at the forefront of your mind. It’s easy to become obsessed with investment markets and chop and change your strategy depending on what happens on that specific day, week, or month – but doing so could be risky and hinder your long-term goals.
As with the remora fish, balancing risk with reward and thinking about the long-term survival of your portfolio could be the most appropriate course of action.
Time in the market may be a more potent strategy than timing the market
A core part of the theory of evolution is that none of the above changes happen overnight. In fact, evolution is a gradual process that unfurls over thousands, if not millions, of years. Significant changes occur gradually through a series of small steps.
In the same vein, wealth creation is a long-term endeavour that requires patience and a consistent approach.
Just as it takes time for a species to evolve and adapt, it takes time for investment portfolios to grow and mature. Short-term market fluctuations can be unsettling, but it’s important to maintain a long-term perspective. Particularly, it can be valuable to avoid making impulsive decisions based on short-term market noise.
By embracing a long-term perspective and staying invested through market cycles, investors could see their portfolios evolve and grow over time, much like a species adapting and evolving over generations.
Get in touch
A financial adviser could help support the natural growth and evolution of your portfolio, helping you adapt as needed and offering guidance that is crucial for long-term prosperity.
Email enquiries@metiswealth.co.uk or call 0345 450 5670 today to find out what we can do for you.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.